Xcel Energy, Inc. :XEL-US: Earnings Analysis: Q1, 2017 By the Numbers : May 2, 2017

Xcel Energy, Inc. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Xcel Energy, Inc. – PNM Resources, Inc. and DTE Energy Company (PNM-US and DTE-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 2,945.42 million, Net Earnings of USD 239.28 million.
  • Gross margins narrowed from 23.07% to 21.44% compared to the same period last year, operating (EBITDA) margins now 30.21% from 30.48%.
  • Year-on-year change in operating cash flow of -9.10% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 2945.42 2794.65 3038.37 2499.37 2771.29
Revenue Growth (%YOY) 6.28 5.63 4.6 -0.45 -6.32
Earnings (mil) 239.28 227.48 457.8 196.8 241.31
Earnings Growth (%YOY) -0.84 8.83 7.35 -0.07 58.69
Net Margin (%) 8.12 8.14 15.07 7.87 8.71
EPS 0.47 0.45 0.9 0.39 0.47
Return on Equity (%) 8.67 8.27 16.88 7.37 9.08
Return on Assets (%) 2.32 2.23 4.59 2 2.47

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Market Share Versus Profits

Revenues History
Earnings History

XEL-US‘s change in revenue this period compared to the same period last year of 6.28% 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 XEL-US is holding onto its market share. Also, for comparison purposes, revenues changed by 5.39% and earnings by 5.19% 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 year-on-year decline in earnings was influenced by a weakening in gross margins from 23.07% to 21.44%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 30.48% to 30.21% in this time frame. For comparison, gross margins were 21.34% and EBITDA margins were 29.69% in the previous 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.

XEL-US‘s change in operating cash flow of -9.10% 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 decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 17.82% to 16.61% and (2) one-time items that contributed to a decrease in pretax margins from 13.35% to 12.08%

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

Xcel Energy, Inc. operates as a holding company, which engages in the generation, purchase, transmission, distribution and sale of electricity and natural gas business through its subsidiaries. It operates through the following segments: Regulated Electric Utility, Regulated Natural Gas Utility and All Others. The Regulated Electric Utility segment generates, transmits and distributes electricity primarily in portions of Minnesota, Wisconsin, Michigan, North Dakota, South Dakota, Colorado, Texas and New Mexico. In addition, this segment includes sales for resale and provides wholesale transmission service to various entities in the United States. It also includes commodity trading operations. The Regulated Natural Gas Utility segment transports, stores, and distributes natural gas primarily in portions of Minnesota, Wisconsin, North Dakota, Michigan and Colorado. The All Others segment primarily includes steam, appliance repair services, nonutility real estate activities, processing solid waste into refuse-derived fuel and investments in rental housing projects that qualify for low-income housing tax credits. The company was founded in 1909 and is headquartered in Minneapolis, MN.

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