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Utility Stock Earnings Mixed For Duke, Sempra (DUK, SRE, RBS)


Duke Energy Corp. (NYSE:DUK) reported higher-than-expected EPS and revenues for the first quarter of 2010. On the other coast, Sempra Energy (NYSE:SRE) had a clear miss on EPS although revenues were higher than expected.

For Duke Energy earnings, adjusted diluted EPS came in at $0.36, compared with analysts’ estimates of $0.32. Revenues were expected to total $3.38 billion in DUK earnings, but came in at a much stronger $3.59 billion. The cold weather in Duke service area gets most of the credit for the good results.

On the other coast, Sempra Energy earnings had a clear miss on EPS although revenues were higher than expected. In the SRE earnings report, EPS adjusted to exclude $96 million ($0.38/share) in a litigation settlement came in at $0.81, a penny below consensus estimates. Expected revenues in Sempra earnings totaled $2.27 billion, and Sempra blew past that number, posting revenues of $2.53 billion.

Utility stock earnings from Dominion Power (D), American Electric Power (AEP), Xcel (XEL), and Entergy (ETR) last week were all down.

Duke’s operating income grew from $349 million in the same period a year ago to $445 million this year. Sempra’s operating income fell from $325 million to $100 million. Cash flow from operations rose nearly an order of magnitude at Duke, from $190 million to $1.12 billion year-over-year. Sempra’s cash flow from operations fell from $1.14 billion to $888 million.

Duke did not provide new guidance for the remainder of the year. Analysts’ expectations are for full-year EPS of $1.29 on revenues of $13.5 billion. Sempra’s commodities joint venture with the Royal Bank of Scotland Group plc (NYSE:RBS), which the companies are trying to unload, were a drag on earnings for the quarter. Sempra lowered its EPS guidance from $4.25-$4.50 to $3.15-$3.40.

Another drag on Sempra’s earnings was a charge of $96 million in connection with a settlement of litigation related to the energy crisis in California in 2001.

Sempra did have some good news. A rate increase at Southern California Gas Co. boosted earnings there and the company’s LNG business swung from a -$7 million loss in the first quarter of 2009 to a profit of $32 million in the first quarter of 2010. Sempra also signed an agreement with Russia’s Gazprom for delivery of two LNG cargoes a month at the company’s Cameron LNG facility near Lake Charles, Louisiana. Provided that natural gas prices firm up, that should help the company going forward.

Sempra’s exposure to commodity risk, particularly through its trading JV with RBS, will continue to hurt the company’s earnings until the venture is sold. Duke saw an increase in demand from industrial customers and expects that to continue.

All told, Duke performed about as one would expect a utility to perform, while Sempra, with its trading business faltering, shows what can happen when a utility miscalculates on developing a new income stream.

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