CenterPoint Energy Q1 2020 Earnings Report
Key Takeaways
CenterPoint Energy reported a significant loss in Q1 2020, driven by after-tax non-cash impairment charges. However, the company's utility operations and midstream investments demonstrated earnings on a guidance basis, excluding these charges. The company reaffirms its 2020 Utility EPS guidance.
CenterPoint Energy reported a loss of $2.44 per diluted share, or $1,228 million, for the first quarter of 2020.
Recognized $1,568 million in after-tax non-cash impairment charges and losses on assets held for sale.
On a guidance basis, Q1 2020 earnings were $0.50 per diluted share from utility operations and $0.10 per diluted share from midstream investments, excluding impairment charges.
Reiterated 2020 Utility EPS guidance range of $1.10 - $1.20 and 5 - 7% Utility EPS CAGR, inclusive of anticipated COVID-19 impacts.
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CenterPoint Energy Revenue by Segment
Forward Guidance
CenterPoint Energy provided 2020 guidance with two components: a guidance basis Utility EPS range and a Midstream Investments EPS expected range.
Positive Outlook
- Reiterated 2020 guidance basis Utility EPS range of $1.10 - $1.20.
- Target 2020-2024 compound annual guidance basis Utility EPS growth of 5 - 7%, using the 2020 range of $1.10 - $1.20 as the starting EPS, assuming the COVID-19 scenario described below.
- 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 newly issued preferred stock were issued as common stock.
- The 2020 Midstream Investments EPS expected range assumes a 53.7 percent limited partner ownership interest in Enable and includes the amortization of the Company’s basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution.
Challenges Ahead
- 2020 Midstream Investments EPS expected range is $0.15 - $0.18.
- The 2020 Utility EPS guidance range incorporates a COVID-19 scenario range of $0.05 - $0.08 which assumes reduced demand levels with April as the peak and reflects anticipated deferral and recovery of incremental expenses, including bad debt.
- The COVID-19 scenario also assumes a gradual re-opening of the economy in CenterPoint Energy's service territories, leading to diminishing levels of demand reduction, which would continue through August.
- Utility EPS guidance excludes certain integration and transaction-related fees and expenses associated with the merger, severance costs, Midstream Investments and allocation of associated corporate overhead, results related to Infrastructure Services and Energy Services, including anticipated costs and impairment resulting from the sale of those businesses, and earnings or losses from the change in value of ZENS and related securities.
- 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.
Revenue & Expenses
Visualization of income flow from segment revenue to net income