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Power companies post mixed results in meeting Q2 analyst expectations

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Power companies post mixed results in meeting Q2 analyst expectations

The largest Canadian and U.S. power companies were fairly split in terms of meeting analyst expectations for the second quarter.

A general rate case decision helped Edison International increase its adjusted core earnings to $1.58 per share in the second quarter from 85 cents per share a year ago.

This result also allowed the Rosemead, Calif.-headquartered utility to rank first on the list in beating analyst expectations for the most recent quarter. Edison International topped the S&P Global Market Intelligence consensus estimate of $1.12 by 41.1%.

In May, California regulators approved a three-step rate adjustment for Southern California Edison Co., which is lower than what the utility asked for. It took the Public Utilities Commission almost three years to review the rate application, and SCE is expected to file its next rate case this fall.

Aside from the rate increase, the company attributed the earnings increase to the timing of regulatory deferrals related to wildfire insurance and mitigation costs. In July, California Gov. Gavin Newsom signed into law a wildfire bill to stabilize the state's investor-owned utilities.

Edison International has committed to joining the $21 billion wildfire insurance fund under the legislation.

"We remain committed to improving our wildfire risk profile through enhanced operational capabilities, while continuing to make significant investments in grid hardening and resiliency, as well as other capital programs that support California's energy goals," Edison International President and CEO Pedro Pizarro said in a July 25 statement.

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Sempra Energy, which also committed to the wildfire insurance fund, reported earnings of $1.10 per share. Those results missed the consensus estimate of $1.18 per share by 6.8%.

However, management is optimistic, saying the new wildfire liability law has greatly improved the operating environment and financial health of electric utilities such as its subsidiary, San Diego Gas & Electric Co.

"We believe these new laws substantially improve the regulatory model in California," Sempra COO Joseph Householder said during an Aug. 2 earnings call.

Another California utility, PG&E Corp., failed to make the list but booked non-GAAP earnings from operations of $1.10 per share, beating the consensus estimate by 11 cents. The company is moving through its Chapter 11 process.

Duke Energy Corp. placed second in the list after reporting earnings of $1.12 per share. The S&P Global Market Intelligence normalized consensus estimate was 98 cents for the quarter.

The company said its higher second-quarter adjusted results were primarily driven by growth from investments at electric and gas utilities and commercial renewables. Given the results, the company reaffirmed full-year adjusted earnings guidance of $4.80 per share to $5.20 per share.

Southern Co. and American Electric Power Co. Inc. also topped analyst expectations amid concerns related to the impact of the global trade war and tariff on industrial sales.

Southern Co. posted net income of 80 cents per share, compared with the consensus estimate of 72 cents per share. AEP, which a Scotia Capital analyst described as the most exposed to the global trade wars, reported operating earnings of $1 per share versus a consensus estimate of 97 cents per share.

Meanwhile, Xcel Energy Inc. and DTE Energy Co. both missed analyst expectations for the second quarter.

Xcel Energy reported lower ongoing earnings of 46 cents per share due to milder-than-normal weather in the second quarter. It missed the consensus estimate of 53 cents per share by 13.2%.

Despite this, Xcel Energy Chairman, President and CEO Ben Fowke assured analysts and investors that the company is on track to deliver earnings within its guidance range for the year. The company targets ongoing earnings of $2.55 per share to $2.65 per share for 2019.

DTE Energy booked operating earnings of 99 cents per share, compared with 2018's $1.36 per share and the consensus estimate of $1.09 per share.

The company is also confident in realizing its financial and operational goals despite the lower results in the second quarter. There were no record-setting temperatures in the most recent quarter, unlike in 2018.

"The solid financial results we have achieved during the first half of the year give us confidence in increasing our 2019 earnings guidance," DTE Energy Senior Vice President and CFO Peter Oleksiak said July 24.

The company now targets operating earnings of $6.02 per share to $6.38 per share for 2019.