How Will Milder Weather Affect CenterPoint Energy’s 4Q15 Numbers?



Milder weather to dent earnings

CenterPoint Energy (CNP) will announce its fourth quarter results on February 26, 2016. It primarily operates in Arkansas, Texas, Mississippi, Louisiana, and Oklahoma. The whole Southern part of the US witnessed warmer weather in the fourth quarter of 2015. Utilities operating there posted weaker quarterly numbers due to poor sales.

Analysts are expecting CNP’s earnings to come in at $0.23 per share in 4Q15 versus its earnings of $0.36 per share in 4Q14. CNP’s management has provided earnings guidance in the range of $1.05 to $1.10 per share for 2015.

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Performance drivers

CenterPoint’s electric segment has a strong customer base growth rate, which can partially compensate for lower sales due to milder weather. In 3Q15, its electric segment reported 2% customer base growth that was well above industry averages. On the other hand, the gas segment posted a customer increase of 1.3% year-over-year. Healthy growth in the Texas economy could also contribute to CNP’s 4Q15 earnings.

Apart from CenterPoint Energy, Xcel Energy (XEL) and American Electric Power (AEP) also have a significant presence in Texas. Both reported weaker sales numbers driven by warmer weather in 4Q15. CNP has a few rate cases that were effective beginning in October 2015 that can have a positive impact on earnings.

CNP is mulling stake sale of Enable Midstream Partners

In 3Q15, CenterPoint reported $862 million in impairments on its equity investments in Enable Midstream Partners (ENBL). It has a 55.4% limited partner interest in ENBL. Enable Midstream is under severe pressure due to prolonged lower oil and gas (UNG) prices. The loss in impairments has reduced CNP’s investment from $4.5 billion to $3.6 billion. Considering the grimmer picture of energy prices, CNP is looking for strategic alternatives like a spin-off or the sale of this investment.


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