DTE Energy Co. :DTE-US: Earnings Analysis: 2016 By the Numbers : February 14, 2017

DTE Energy Co. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of DTE Energy Co. – Xcel Energy Inc., CMS Energy Corporation and WEC Energy Group Inc (XEL-US, CMS-US and WEC-US) that have also reported for this period.

Highlights

  • Gross margins widened from 16.88% to 17.14% compared to the same period last year, operating (EBITDA) margins now 22.84% from 22.05%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 10630 10321 12217 9628 8751
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 868 727 905 661 666
Earnings Growth (YOY) 19.39 -19.67 36.91 -0.75 -6.72
Net Margin 8.17 7.04 7.41 6.87 7.61
EPS 4.83 4.06 5.1 3.78 3.55
Return on Equity 9.87 8.48 11.11 8.6 9.21
Return on Assets 3.02 2.56 3.36 2.53 2.54

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 16.88% to 17.14% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 22.05% to 22.84% compared to the same period last year. For comparison, gross margins were 16.88% and EBITDA margins were 22.05% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

DTE-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 1.61 days from 9.85 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 13.35% to 13.66% and (2) one-time items. The company’s pretax margins are now 10.40% compared to 9.20% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for DTE Energy Co.

Company Profile

DTE Energy Co. is a diversified energy company, which is primarily engaged in the business of providing electricity and natural gas sales, distribution and storage services throughout Michigan through its subsidiaries. It operates through the following segments: DTE Electric, DTE Gas and Other. The DTE Electric segment is engaged in the generation, purchase, distribution and sale of electricity to residential, commercial and industrial customers in southeastern Michigan. The DTE Gas segment consists principally of DTE Gas, which is engaged in the purchase, storage, transportation, distribution and sale of natural gas residential, commercial and industrial customers throughout Michigan and the sale of gas storage and transportation capacity. The Other segment is involved in natural gas pipelines, gathering and storage; power and industrial projects; and energy marketing and trading operations. The company was founded in January 1995 and is headquartered in Detroit, MI.

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