CenterPoint Energy 1Q profit up 18% on strong utility business performance

CenterPoint Energy Inc. on Tuesday moved well past Wall Street expectations as the Houston-based energy giant’s utility business contributed more than half of the company’s first quarter earnings growth.

For the period ended March 31, CenterPoint reported first quarter net income of $154 million, or 36 cents share, up 17.6% compared with $131 million, or 30 cents for share, in the same period of 2015. On a guidance basis, first quarter 2016 earnings were 32 cents per share, consisting of 23 cents from utility operations and nine cents from midstream investments. The Houston utility operator’s revenue slumped 18.5% to $1.98 billion, compared to $2.43 billion a year ago.

A survey of 12 analysts covering the utility giant forecasted CenterPoint would post first quarter earnings of 31 cents per share on revenue of $2.44 billion, according to Thomson Reuters.

“2016 is off to a solid start with strong performance from our gas and electric utilities,” said CenterPoint President and CEO Scott Prochazka. “Enable Midstream provided first quarter earnings in-line with expectations as they continue to execute their strategy.”

In the first quarter, CenterPoint Energy Services Inc. (CES), a wholly-owned subsidiary of CenterPoint Energy, closed on a deal to acquire the retail energy services business of privately-held Continuum Retail Energy Services LLC. The acquisition includes Continuum’s energy services business and natural gas wholesale assets. Both companies are based in Houston.

With the addition of these businesses, CES now operates in 26 states serving nearly 24,000 commercial and industrial customers, and more than 65,000 individual Choice customers. CES will be ranked as one of the nation’s top 15 natural gas marketers based on volume.

CenterPoint Energy Inc. officials also revealed in February that the Houston-based energy company is exploring the use of the Real Estate Investment Trust (REIT) business model for all or part of the utility businesses, which includes the company’s regulated natural gas operations in Arkansas. On the regulated side of the business, CenterPoint serves as the holding company for natural gas utilities in Arkansas, Oklahoma, Louisiana, Texas and Minnesota, where it serves more than 5 million metered customers.

Companywide, CenterPoint’s the electric transmission & distribution segment reported operating income of $83 million for the first quarter of 2016, consisting of $59 million from the regulated electric transmission & distribution utility operations (TDU) and $24 million related to securitization bonds.

The natural gas distribution segment reported operating income of $160 million for the first quarter of 2016, compared with $146 million for the same period of 2015.

The energy services segment reported operating income of $6 million for the first quarter of 2016, compared with $13 million for the same period of 2015. The midstream investments segment reported $60 million of equity income for the first quarter of 2016, compared with $52 million in the first quarter of the prior year.

CenterPoint Energy reaffirmed its yearly earnings estimate in the range of $1.12 to $1.20 per diluted share.

In Tuesday’s morning session, CenterPoint shares were up 1%, or 22 cents at $21.90 on the Nasdaq stock exchange, just off its 52 week high. The Houston-based energy company’s stock has traded over the past year in the range of $16.05 to $22.12.