The utility sector disappointed in its third-quarter results over the last two weeks with earnings and revenue miss from some of the major players in the space, including Duke Energy Corporation (DUK – Analyst Report), NextEra Energy (NEE – Analyst Report) and Dominion Resources Inc. (D – Analyst Report). However, a recovering U.S. economy, warmer-than-normal weather and ultra low interest rates helped boost the top and bottom lines of most of these companies.
The latest concern threatening the utility sector is the possibility of an interest rate hike in December by the Fed following stellar jobs report for October and the Fed Chair Janet Yellen’s affirmative stance on it. This high-yielding, capital intensive sector mostly resorts to external sources of financing to carry out its generation, distribution and transmission projects. Therefore, a rising interest rate environment certainly does not bode well for them (read: 3 Utility ETFs Suffering from Rate Hike Worries).
Below we have highlighted the third quarter results of the aforementioned utility companies in detail.
Duke Energy
Duke Energy reported adjusted earnings of $1.47 per share for the quarter that fell short of the Zacks Consensus Estimate of $1.52 by 3.3%. However, quarterly earnings rose 5% year over year on the back of warmer weather compared to the previous year. Further, robust growth in its regulated utilities business as well as the North Carolina Eastern Municipal Power Agency acquisition led to the upside.
Total revenue was $6,483 million, lagging the Zacks Consensus Estimate of $6,595 million by 1.7%. Nevertheless, revenues increased 1.4% on a year-over-year basis, driven mainly by rise in the company’s regulated electric unit’s revenues.
The company tapered its high end of the earlier 2015 earnings guidance range to $4.55−$4.65 per share from $4.55−$4.75 per share. Shares of the company declined 5.5% (as of November 9, 2015) since its earnings release on November 5.
NextEra Energy
NextEra Energy’s quarterly adjusted earnings of $1.60 per share missed the Zacks Consensus Estimate of $1.64 by 2.4%. Despite this, earnings climbed 3.2% year over year on the back of higher revenues from Florida Power & Light Company. However, operating revenues of $4,954 million surpassed the Zacks Consensus Estimate by 2.7% and increased 6.5% from the year-ago level.
NextEra reaffirmed its 2015 earnings guidance of $5.40–$5.70 per share and expects the figure to come in on the upper end of the range. Meanwhile, earnings per share are expected in a range of 5.85–$6.35 for 2016 and $6.60–$7.10 for 2018. Shares of the company went down nearly 5% since its earnings release on October 28.
