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Income Investing

Grace under Fire

By Roger S. Conrad, on Oct. 23, 2013

Although Entergy Corp won’t report its full third-quarter earnings until Oct. 29, the electric utility did issue preliminary guidance calling for headline earnings per share of about $1.33–down from $1.89 a year ago.

That being said, Entergy Corp expects to post third-quarter operational earnings–which exclude one-time factors and noncash expenses–of $2.40 per share and reiterated its guidance for 2013 operational earnings of $4.60 to $5.40 per share. Management indicated that the utility’s full-year results likely would come in at the midpoint of this range.

Vermont Yankee Closure

Management attributed the year-over-year decline in net income per share to impairments and expenses related to the decision to close and decommission the Vermont Yankee nuclear power plant at the end of its current operating cycle in 2014.

Political opposition to Vermont Yankee’s relicensing and challenging wholesale power markets–a product of persistently weak natural-gas prices–prompted Entergy to thrown in the towel and announce plans to shutter this controversial facility.

This decision comes as a bit of a disappointment, but the closure of the controversial nuclear power plant resolves this ongoing saga and resolves some of the uncertainty surrounding the stock.

More important, Entergy generates sufficient cash flow from its regulated utility business to cover its quarterly dividend; the plan to shut down Vermont Yankee doesn’t threaten the sustainability of the utility’s dividend

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