CenterPoint 1Q earnings decline 15% as merger moves forward

CenterPoint Energy Inc., which closed its $6 billion deal to acquire Indiana-based Vectren Corp. in early 2019, on Thursday (May 9) posted first quarter profits below year ago results as the Houston-based natural gas utility seeks to integrate its sprawling operations across eight states.

For the period ended March 31, CenterPoint reported first quarter net income of $140 million, or 28 cents per share, down 15.2% from profits of $165 million, or 38 cents per share, in the same period of 2018. The natural gas distributor’s quarterly revenue climbed to $3.28 billion, up 13.1% from $2.9 billion a year ago.

Excluding the impact of costs associated with the Vectren merger, which closed on Feb. 1, the company’s first quarter 2018 earnings were 46 cents per share. A survey of energy analysts had forecasted CenterPoint to report quarterly earnings of 52 cents per share on revenue of $3.89 billion, according to Thomson Reuters.

That first quarter earnings miss on Wall Street pushed the company’s stock down more than 2%, or 63 cents at $29.21 in Thursday’s early session on the New York stock Exchange. Despite lower profits from a year ago, CenterPoint President and CEO Scott Prochazka said he was pleased with the company’s first quarter results.

“While weather-related impacts affected first quarter earnings, we remain confident in our anticipated 2019 full-year performance,” said Prochazka. “Our utilities continue to benefit from strong customer growth and recovery mechanisms allowing for timely recovery of capital invested on behalf of our customers.”

As CenterPoint now seeks to integrate its operations and management team, the regulated natural gas utility has electric transmission and distribution, power generation and natural gas distribution businesses that serves more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. Corporate filings show the Houston-based utility has 378,829 residential and 47,965 industrial customers in Arkansas entering 2019.

Companywide, CenterPoint’s Houston-based electricity transmission & distribution segment reported operating income of $84 million in the first quarter, consisting of $74 million from the regulated electric transmission and distribution utility operations (TDU) and $10 million related to securitization bonds.

The company’s Indiana-based integrated power business reported an operating loss of $9 million for the period of February 1, 2019 through March 31, 2019. Those losses included $20 million of merger-related expenses, officials said.

The natural gas distribution segment reported operating income of $167 million for the first quarter of 2019. As of February 1, 2019, this segment includes the results of the Indiana and Ohio gas utilities acquired in the merger. Operating income for the first quarter of 2019 includes $53 million of merger-related expenses.

CenterPoint’s energy services business reported operating income of $33 million for the first quarter of 2019, which included a mark-to-market gain of $19 million. The company’s infrastructure services segment reported an operating loss of $16 million for the period of February 1, 2019 through March 31, 2019.

In its midstream investments business, the Houston utility reported $62 million of equity income for the first quarter of 2019, compared with $69 million in the first quarter of 2018. CenterPoint’s corporate office saw a quarterly operating loss of $14 million, mostly related to merger expenses.

The Houston-based utility operator’s 2019 earnings per share guidance remains in the range of $1.60-$1.70, excluding certain impacts associated with the Vectren merger. For 2020, CenterPoint forecasts earnings to improve to the range of $1.75 to $1.90 per share on a yearly basis.

Over the past 52 weeks, CenterPoint shares have traded in the range of $25.10 as a low and $31.42 as a yearly high.