The performance of Canadian and U.S. power companies was mixed in terms of meeting Wall Street expectations for the fourth quarter of 2018, an analysis of S&P Global Market Intelligence shows.
Entergy Corp. easily topped the list despite reporting lower operational earnings year over year.
The company recorded operational earnings of 60 cents per share in the fourth quarter of 2018, beating the S&P Global Market Intelligence consensus normalized earnings estimate of 41 cents per share by 46.3%. "We see rate increases helping to drive future EPS growth, driven by strong capital spending, which includes significant spending on new generation projects," said CFRA Equity Research analyst Christopher Muir in a Feb. 20 investor note.
CFRA reiterated its "buy" rating on Entergy, which also ranked first in the 2017 fourth quarter.
Southern Co. ranked second, posting earnings of 25 cents per share. The consensus normalized earnings estimate for the quarter was 23 cents per share.
CFRA also maintained its "buy" rating on Southern and lifted its 12-month price target by $2 to $52. "Over the next few years, we expect [Southern]'s EPS growth rates to begin increasing to levels closer to its peers and we see valuations starting to increase to levels closer to peers, especially as nuclear plant construction nears completion," Muir said in another Feb. 20 investor note.
During the company's earnings call, Southern management said the Alvin W. Vogtle Nuclear Plant expansion in Georgia is about 74% complete and could possibly beat the in-service date of November 2021 for unit 3 and November 2022 for unit 4.
Sempra Energy came in third, beating the consensus estimate by 10 cents, or 6.8%. The company reported higher adjusted earnings of $1.56 per share for the fourth quarter of 2018.
The company is optimistic on a solution to wildfire liabilities of investor-owned utilities, including its subsidiary San Diego Gas & Electric Co., in California. "We do not think a strict liability standard is the appropriate standard for investor-owned utilities," Sempra Chairman and CEO Jeffrey Martin said during the Feb. 26 earnings call.
Edison International, which is also affected by those wildfire liabilities through its Southern California Edison Co. subsidiary, missed the consensus normalized earnings estimate by 2.1%. The company reported fourth-quarter 2018 core earnings of 94 cents per share, compared with the consensus EPS estimate of 96 cents.
"We think wildfire charges could lead to equity issuances," said Muir in lifting CFRA's view on Edison International shares to "hold" from "sell" on March 1. CFRA also raised its 12-month target by $8 to $60 on higher peer evaluations and an adjustment to its view of wildfire risks.
California fire officials confirmed March 13 that SoCalEd's power lines were involved in the December 2017 Thomas Fire. The utility, however, is questioning the investigators' conclusions.
Meanwhile, Dominion Energy Inc.'s operating earnings of 89 cents per share also missed the consensus normalized EPS estimate of 91 cents by 2.2%.
Dominion Chairman, President and CEO Thomas Farrell II said during the Feb.1 earnings call that the "zero carbon" power supply contract for its Millstone nuclear plant in Connecticut is unacceptable because the price for the first three years is approximately equal to the New England wholesale power price.
On March 15, Dominion reached a deal to sell power from the Millstone plant to Eversource Energy and Avangrid Inc. subsidiary United Illuminating Co. The last-minute deal would bolster the plant's economic viability and delay its retirement. Both Eversource Energy and Avangrid also missed EPS estimates for the fourth quarter of 2018.
During the earnings call, Dominion management also noted that construction costs for the Atlantic Coast Pipeline LLC natural gas transportation project could exceed the $7.0 billion estimate.
Duke Energy Corp. executives also raised concerns over litigation and permit delays at the Atlantic Coast gas pipeline project during the Feb. 14 earnings call.
The company failed to meet analyst expectations, reporting lower earnings of 84 cents per share, compared with the consensus EPS estimate of 89 cents. Duke attributed the earnings decline to higher depreciation and amortization expenses on a growing asset base and higher storm-related costs.
Other companies that missed analyst expectations were DTE Energy Co. and Ameren Corp.