Volumes Contract, DPL Misses - Analyst Blog
31 Outubro 2011 - 12:30PM
Zacks
Diversified energy utility, DPL Inc. (DPL)
reported third quarter 2011 financial results. Earnings for the
quarter were 70 cents per share, below the Zacks Consensus Estimate
of 76 cents per share and year-ago earnings of 74 cents per share.
This was primarily the result of lower sales volumes.
On a reported basis the company clocked earnings per share of 58
cents versus 74 cents in the year-ago quarter. The variance of 12
cents between adjusted and reported earnings in the reported
quarter emanated from 6 cents from mark to market losses, 5 cents
from its ongoing merger proceeding costs with The AES
Corporation (AES), and a penny from storm costs.
Earlier, in April 2011, DPL had agreed to merge with AES Corp.
Per the agreement AES will acquire DPL in a transaction valued at
$4.7 billion. On completion, DPL will become a wholly owned
subsidiary of AES Corp.
Operational Update
In the reported quarter, DPL’s total revenue of $511.8 million
came below the Zacks Consensus Estimate of $533 million and the
year-ago revenue of $516.9 million. The results reflect lower
retail and a decrease in RTO capacity revenues. This was partially
offset by higher retail rates, an increase in wholesale sales
volumes, and higher average wholesale prices.
Retail revenues increased $7.7 million to $410.3 million
resulting primarily from a 3% increase in average retail rates.
This was partially offset by increased customer shopping and a
decrease especially in residential retail sales volume.
Wholesale revenues increased $9.5 million to $40.7 million
primarily as a result of a 16% increase in average wholesale prices
and a 12% increase in wholesale sales volumes. All other revenues,
including mark to market losses, decreased $22.3 million primarily
due to a decrease in Pennsylvania – New Jersey – Maryland (‘PJM’)
regional transmission organization capacity revenue.
Fuel costs in the quarter under review increased 24% to $129.0
million primarily due to a 20% increase in average fuel prices and
a $10.4 million increase related to unrealized mark-to-market fuel
losses. These increases were partially offset by a 3% reduction in
generation volume and a $2.7 million net increase in gains realized
from emission allowance and coal sales.
Total Purchased power costs were $108.3 million, down 9% due to
the decrease in RTO capacity charges and reduction in average
purchase power prices. This was partially offset by an increase in
purchased power volumes.
Gross margin decreased $19.1 million, or 7%, to $274.5 million
for the third quarter 2011 compared with $293.6 million for the
same period in 2010. Overall, DPL reported net income of $67.7
million compared with $86.4 million in the year-ago quarter.
Financial Update
DPL's cash and cash equivalents totaled $67.6 million as on
September 30, 2011 compared with $124.0 million as on December 31,
2010. The decrease in cash and cash equivalents was primarily
attributable to capital expenditures, purchase of capital
securities, and dividend.
Long-term debt was $1.2 billion as against approximately $1
billion at fiscal-end 2010. Net cash provided by operating
activities in the first nine months of 2011 was $264.8 million
compared with $331.6 million in the year-ago period.
Guidance
DPL Inc. now expects adjusted earnings from continuing
operations for 2011 to be at the lower end of its previously
announced guidance range of $2.30–$2.55 per share.
Our Take
Dayton, Ohio-based DPL Inc. is a diversified energy company that
sells electricity through its subsidiaries – Dayton Power and Light
Company (DP&L), DPL Energy Resources, Inc. (DPLER) and DPL
Energy, LLC (DPLE).
DPL has performed consistently across its solid base of stable
utility operations. We also like its strong balance sheet, higher
rates, and regulatory approval for recovery of fuel cost.
However, the near-term upside is constrained by regulatory
risks, tepid growth in the economy, the high unemployment level in
Ohio and lofty purchase power costs. Thus, in the absence of any
positive near-term triggers, DPL presently retains a short-term
Zacks #4 Rank (Sell). Over the longer run we maintain our long-term
Neutral recommendation on the stock.
AES CORP (AES): Free Stock Analysis Report
DPL INC (DPL): Free Stock Analysis Report
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