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Why Is Entergy (ETR) Up 9.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Entergy (ETR). Shares have added about 9.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Entergy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Entergy Q3 Earnings Beat Estimates, Revenues Down Y/Y

Entergy Corporation reported third-quarter 2020 adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate of $2.42 by 0.8%. However, the reported figure declined 3.2% from $2.52 per share in the year-ago quarter.

Excluding the effects of special items, the company registered GAAP earnings of $2.59 per share compared with $1.82 a year ago.

Total Revenues

In the quarter under review, total revenues came in at $2,903.6 million, which lagged the Zacks Consensus Estimate of $3,216 million by 9.7%. Moreover, the top line fell 7.5% from the year-ago quarter’s $3,140.6 million.

Segment Results

Utility: The segment’s quarterly adjusted earnings came in at $2.74 per share compared with $2.88 in the prior-year quarter. The decline primarily was due to lower sales volume and higher depreciation and interest expenses.

Parent & Other: The segment incurred an adjusted loss of 30 cents per share compared with a loss of 36 cents in the prior-year quarter.

Entergy Wholesale Commodities (EWC): The segment registered earnings of 15 cents per share on an as-reported basis against a loss of 70 cents in the year-ago quarter. The uptick in earnings was due to lower asset write-offs and impairments, higher gains on decommissioning trust funds and lower depreciation expenses.

Highlights of the Release

Operating expenses in the quarter summed $2,125.6 million, down 18.9% from $2,620.6 million in the year-ago quarter.

Interest expenses were $196.7 million, up 5.4% from $186.6 million in the year-ago quarter.

In the reported quarter, total retail customers served by the company increased 1% to nearly 2.96 million.

Financial Highlights

As of Sep 30, 2020, Entergy had cash and cash equivalents of $1,239.7 million compared with $425.7 million as of Dec 31, 2019.

Long-term debt was $19.61 billion as of Sep 30, 2020, compared with $17.08 billion as of Dec 31, 2019.

As of Sep 30, 2020, the company generated cash from operating activities of $921.9 million, down from $1,064.9 million in the prior-year quarter.

Guidance

For 2020, Entergy narrowed its adjusted EPS to $5.60-$5.70 from $5.45-$5.75. The Zacks Consensus Estimate for the company’s earnings is currently pegged at $5.58 per share, which is below the company’s guidance range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 11.91% due to these changes.

VGM Scores

Currently, Entergy has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Entergy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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