Why Is CenterPoint (CNP) Down 32.5% Since Last Earnings Report?

It has been about a month since the last earnings report for CenterPoint Energy (NYSE:CNP). Shares have lost about 32.5% in that time frame, underperforming the S&P 500.

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

CenterPoint Energy Q4 Earnings Tops, Revenues Up Y/Y

CenterPoint Energy reported fourth-quarter 2019 adjusted earnings of 45 cents per share, which exceeded the Zacks Consensus Estimate of 37 cents by 21.6%. The bottom line soared 25% from the year-ago quarter’s tally of 36 cents.

The company’s GAAP earnings came in at 25 cents per share compared with 18 cents registered in the prior-year quarter.

For 2019, CenterPoint Energy posted adjusted earnings of $1.79 per share, which surpassed with the Zacks Consensus Estimate of $1.69 by 5.9%. Full-year earnings also improved by 11.9% from the year-ago tally of $1.60.

Revenues

CenterPoint Energy’s total revenues in the quarter were $3,230 million, which lagged the Zacks Consensus Estimate of $3,897 million by 17.1%. However, the reported figure was 6.4% higher than $3,036 million a year ago.

Increased contribution from both the utility segments led to top-line growth.

For 2019, the company’s total revenues of $12,301 million missed the Zacks Consensus Estimate of $12,890 million by 4.6%. However, the top line was 16.2% higher than $10,589 million registered in 2018.

Operational Results

Total expenses during the fourth quarter increased 2.1% to $2,928 million.

The company’s operating income surged 80.8% to $302 million from $167 million in the year-ago quarter.

Interest and other finance charges increased to $139 million from $102 million a year ago.

Segment Results

The Electric Transmission & Distribution segment reported operating income of $102 million in the fourth quarter compared with $100 million in the year-ago quarter.

The Natural Gas Distribution segment reported operating income of $167 million compared with $100 million in the year-ago quarter.

The Energy Services segment incurred operating loss of $32 million compared to the operating loss of $27 million in the year-ago quarter.

The Infrastructure Services segment reported operating income of $45 million compared with $95 million in the year-ago quarter.

The Other Operations segment incurred operating loss of $6 million in line with the prior-year quarter’s figure.

Financial Condition

As of Dec 31, 2019, CenterPoint Energy had cash and cash equivalents of $241 million, down significantly from $4,231 million as of Dec 31, 2018.

Total long-term debt was $14,244 million as of Dec 31, 2019, compared with $8,682 million as of Dec 31, 2018.

At the end of 2019, the company’s net cash from operating activities was $1.638 million, up from $2,136 million in the previous year.

Further, CenterPoint Energy’s total capital expenditure totaled $2,580 million in 2019, up from $1,720 million a year ago.

2020 Guidance

CenterPoint Energy issued its 2020 earnings guidance. The company currently expects to generate earnings in the range of $1.10-$1.20 per diluted share, excluding certain impacts associated in relation to its merger with Vectren. 2020. Its Midstream Investments EPS expected range is 23-28 cents.

The Zacks Consensus Estimate for 2020 earnings is pegged at $1.58, which lies above the mid-point of the company’s guided range.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -24% due to these changes.

VGM Scores

At this time, CenterPoint has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CenterPoint has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.