UPDATE: CenterPoint Energy (CNP) Misses Q2 EPS by 10c; Offers FY20 EPS Guidance Below Consensus

(Updated - August 6, 2020 6:45 AM EDT)

CenterPoint Energy (NYSE: CNP) reported Q2 EPS of $0.11, $0.10 worse than the analyst estimate of $0.21. Revenue for the quarter came in at $1.58 billion versus the consensus estimate of $2.17 billion.

“Our second quarter results demonstrate our employees’ resilience and dedication to safely serving our customers during these unique and challenging times,” said Dave Lesar, President and Chief Executive Officer of CenterPoint Energy. “I would especially like to thank our operations personnel for their unwavering commitment and tireless efforts to deliver on CenterPoint Energy’s brand promise of being ‘Always There’ for our customers.

"Despite the challenges brought on by COVID-19, our utilities delivered strong second quarter results driven by customer growth, rate relief and disciplined O&M management," said Lesar. "We are reiterating CenterPoint Energy's 2020 Utility EPS guidance range of $1.10 - $1.20 and expected 5 - 7% 5-year guidance basis Utility EPS CAGR, including the anticipated full year impacts of $0.10 - $0.15 related to COVID-19."

Lesar added, "As CEO and also Chairman of the Business Review and Evaluation Committee of the Board (the "Committee"), I am driving a process dedicated to thoroughly assessing opportunities to accomplish the objective of creating sustainable value for our stakeholders. The comprehensive review by the Committee is an on-going and robust process to unlock the potential of our Company, business and investments. Formal recommendations to the Board are expected in October 2020.

"I believe that CenterPoint Energy is a strong company with great regulated assets and attractive opportunities to invest incremental capital across premier organic growth jurisdictions," said Lesar. "I am greatly energized about the future of this company and will work tirelessly to drive maximum value for all of our stakeholders."

GUIDANCE:

CenterPoint Energy sees FY2020 EPS of $1.10-$1.20, versus the consensus of $1.29.

Earnings Outlook

To provide greater transparency on utility earnings, 2020 guidance will be presented in two components, a guidance basis Utility EPS range and a Midstream Investments EPS expected range.

• Reiterate 2020 guidance basis Utility EPS range of $1.10 - $1.20
• 2020 - 2024 target of 5 - 7% compound annual guidance basis Utility EPS growth, using the 2020 range of $1.10 - $1.20 as the starting EPS, assuming the COVID-19 scenario range described below
• 2020 Midstream Investments EPS expected range is $0.15 - $0.18

Utility EPS Guidance Range

• Utility EPS guidance range includes net income from Houston Electric, Indiana Electric and Natural Gas Distribution segments, as well as after tax operating income from the Corporate and Other segment.
• The 2020 Utility EPS guidance range considers operations performance to date and assumptions for certain significant variables that may impact earnings, such as customer growth (approximately 2% for electric operations and 1% for natural gas distribution) and usage including normal weather, throughput, recovery of capital invested through rate cases and other rate filings, effective tax rates, financing activities and related interest rates, regulatory and judicial proceedings, anticipated cost savings as a result of the merger and reflects dilution and earnings as if the Series C preferred stock were issued as common stock. In addition, the Utility EPS guidance range incorporates a COVID-19 scenario range of $0.10 - $0.15 which assumes reduced demand levels and miscellaneous revenues with the second quarter as the peak and reflects anticipated deferral and recovery of certain incremental expenses, including bad debt. The COVID-19 scenario range also assumes a gradual re-opening of the economy in CenterPoint Energy's service territories, with anticipated reduced demand and lower miscellaneous revenues over the remainder of 2020. To the extent actual recovery deviates from these COVID-19 scenario range assumptions, the 2020 Utility EPS guidance range may not be met and our projected full-year guidance range may change. The Utility EPS guidance range also assumes an allocation of corporate overhead based upon its relative earnings contribution. Corporate overhead consists of interest expense, preferred stock dividend requirements, income on Enable preferred units and other items directly attributable to the parent along with the associated income taxes.
• Utility EPS guidance excludes:
  • Certain expenses associated with merger integration and Business Review and Evaluation Committee activities
  • Severance costs
  • Midstream Investments and allocation of associated corporate overhead
  • Results related to Infrastructure Services and Energy Services, including costs and impairment resulting from the sale of those businesses
  • Earnings or losses from the change in value of ZENS and related securities

In providing this 2020 guidance, CenterPoint Energy uses a non-GAAP measure of adjusted diluted earnings per share that does not consider the items noted above and other potential impacts such as any changes in accounting standards, impairments or other unusual items, which could have a material impact on GAAP reported results for the applicable guidance period. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking adjusted diluted earnings per share because changes in the value of ZENS and related securities are not estimable as they are highly variable and difficult to predict due to various factors outside of management’s control.

Midstream Investments EPS Expected Range

The 2020 Midstream Investments EPS expected range is $0.15 - $0.18. In providing this EPS range for Midstream Investments, the company assumes a 53.7 percent ownership of Enable's common units and includes the amortization of its basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution. The Midstream Investments EPS expected range reflects dilution and earnings as if CenterPoint Energy's Series C preferred stock were issued as common stock. The Midstream Investments EPS expected range takes into account such factors as Enable’s most recent public outlook for 2020 dated August 5, 2020, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items.

For earnings history and earnings-related data on CenterPoint Energy (CNP) click here.

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