Morningstar | CenterPoint Reports Flat 3Q Earnings and Enable Initiates Strong 2019 Guidance
We are reaffirming our $29 per share fair value estimate after CenterPoint Energy reported flattish 2018 third-quarter earnings, reaffirmed earnings guidance, and provided EPS contribution from Enable based on its recently initiated 2019 guidance. CenterPoint also indicated the all-cash acquisition of Vectren remains on track for a 2019 first-quarter closing.Adjusted third-quarter EPS were $0.39 versus $0.38 in the same period last year. CenterPoint's electric and natural gas utilities posted weak results, contributing $0.25 in the third quarter versus $0.28 in the same period last year. However, the weak results appear to be mostly a O&M timing difference. Management indicated both Houston Electric and natural gas distribution operations are performing in line with expectations.
Midstream investments--primarily CenterPoint's 54% ownership of Enable Midstream Partners--contributed $0.04 more in the recently ended quarter versus last year, more than offsetting the weak utility results. Enable initiated 2019 net income attributable to common unitholders of $435 million-$505 million. This would translate to $0.42-$0.48 per common CenterPoint share after deducting for the basis differential and assuming 504 million shares.
CenterPoint reaffirmed 2018 EPS would likely be near the top end of their $1.50-$1.60 guidance range and our $1.60 per share estimate is unchanged. However, we have moved our 2019-22 estimates $0.03-$0.04 per share higher based on the higher potential capital investment for the Freeport Master Plan. We also assume an increase in Enable’s earnings contribution.
These modest changes put our 2020 earnings estimate, now $1.89 per share versus our previous estimate of $1.86 per share, slightly higher than the midpoint of CenterPoint’s unchanged guidance range of $1.76-$1.98 per share. However, our slightly higher EPS estimates did not have a material change to our fair value estimate.
CenterPoint Energy owns interests in Enable Midstream Partners, LP. The company's subsidiaries own and operate electric transmission and distribution, electric generation and natural gas distribution facilities, supply natural gas to commercial and industrial customers and electric and natural gas utilities and provide underground pipeline construction and repair services, energy performance contracting and sustainable infrastructure services. The company's segments include: Houston Electric T&D, which consists of electric transmission and distribution services in the Texas Gulf Coast area; and Energy Services, which consists of non-rate regulated natural gas sales and services operations.
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