Spark Energy, Inc. :SPKE-US: Earnings Analysis: Q4, 2016 By the Numbers : March 16, 2017

Spark Energy, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Spark Energy, Inc. – Duke Energy Corporation, DTE Energy Company, Southern Company and SCANA Corporation (DUK-US, DTE-US, SO-US and SCG-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 172.18 million, Net Earnings of USD 7.75 million.
  • Gross margins widened from 13.24% to 27.09% compared to the same period last year, operating (EBITDA) margins now 15.29% from 3.65%.
  • Year-on-year change in operating cash flow of -1.69% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • 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:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 172.18 166.39 71.8 99.4 107.05
Revenue Growth (%YOY) 60.85 82.17 17.53 1.73 29.17
Earnings (mil) 7.75 0.18 2.34 4.17 -0.02
Earnings Growth (%YOY) 40873.68 -86.07 230.65 73.23 98.3
Net Margin (%) 4.5 0.11 3.26 4.2 -0.02
EPS 1.2 -0.04 0.3 0.68 -0.01
Return on Equity (%) 26.43 0.9 19.41 43.36 -0.22
Return on Assets (%) 8.68 0.29 5.72 10.38 -0.05

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Market Share Versus Profits

Revenues History
Earnings History

SPKE-US‘s change in revenue this period compared to the same period last year of 60.85% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that SPKE-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.48% and earnings by 4,133.33% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 13.24% to 27.09% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 3.65% to 15.29% compared to the same period last year. For comparison, gross margins were 21.90% and EBITDA margins were 16.07% 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

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SPKE-US‘s change in operating cash flow of -1.69% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -3.36% to 9.80% and (2) one-time items. The company’s pretax margins are now 16.09% compared to 3.28% 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

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Company Profile

Spark Energy, Inc. operates as a retail energy services company, which supplies electricity and natural gas. It operates through the Retail Natural Gas and Retail Electricity segments. The Retail Natural Gas segment purchases natural gas supply through physical and financial transactions with market counterparts and supply natural gas to residential and commercial consumers pursuant to fixed-price, variable-price and flat rate contracts. The Retail Electricity segment supplies through physical and financial transactions with market counterparts and independent system operators and supply electricity to residential and commercial consumers pursuant to fixed-price and variable-price contracts. The firm also provides green energy solutions and offers renewable electricity and carbon neutral natural gas products. The company was founded in 1999 and is headquartered in Houston, TX.

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