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COPEL (ELP) Q1 Earnings Up Y/Y on Sales Growth, Lower Costs

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Companhia Paranaense de Energia ELP or COPEL reported impressive first-quarter 2017 results, with net income surging 206.6% year over year to R$417.3 million ($132.9 million).

Earnings per share were R$1.50 or 48 cents per American Depository Receipt (ADR), up from R$0.49 per share or 13 cents per ADR.

Revenues

Net operating revenue in the quarter totaled R$3,297 million ($1,050 million), reflecting year-over-year growth of 7%.

The top-line was driven by growth of 6.2% in electricity sales to distributors, 32.9% in sales derived from use of main distribution and transmission grid, 11.9% in telecommunications revenues and 35% increase in other operating revenues. This improvement was partially offset by decline of 28.2% in electricity sales to final customers, 19.1% in construction revenues, 29.9% in fair value of assets from the indemnity for the concession and 4.5% from distribution of piped gas.

Electricity Sales

COPEL’s electricity sales to final customers include Copel Distribuicao’s sales in the captive market and Copel Geracao e Transmissao’s sales in the free market.

The company’s electricity sales to final customers decreased 5.6% year over year to 6,513 Gigawatt hours in the quarter. The decline was led by a fall of 18% in Industrial and 5.8% in Commercial, partially offset by 6.6% growth in Residential, 2.6% in Rural and 2.3% in Other segment.

Expenses/Income

COPEL’s first-quarter 2017 operating costs and expenses decreased 9.5% year over year to R$2,507.7 million ($798.6 million). Expenses, as a percentage of revenues, were 76.1% compared with 89.9% in the year-ago quarter. The company recorded 10.3% decline in costs related to electricity purchased for resale, 36.1% fall in charge of the main distribution and transmission grid, 6.9% in pension and healthcare plans. It also witnessed a fall of 16.9% in costs related to materials and supplies, 51.8% in materials & supplies costs for power electricity, 28.2% in natural gas and supplies costs for the gas business, 7.2% in third-party services, 18.5% in provisions and reversals, and 14.1% in other costs and expenses.

However, the impact of lower costs and expenses was partially offset by 11.3% growth in personnel and management costs, 2.3% in depreciation and amortization and 6.1% in construction costs.

Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) surged 51% to R$811.5 million ($258.4 million), with an EBITDA margin of 24.6%.

Balance Sheet & Cash Flow

Exiting the first quarter, COPEL had cash and cash equivalents of R$945.6 million ($302.1 million), down 3.7% from R$982.1 million ($302. 2 million) recorded at the prior-quarter end. Loans, financing and debentures inched down 1% sequentially to R$6,170 million ($1,971.2 million).

In the quarter, COPEL’s net cash from operating activities increased 118.1% year over year to R$427.4 million ($136.1 million). Capital spending on the purchase of property, plant and equipment totaled R$197.6 million ($62.9 million), down 9.4% year over year.

During the quarter, the company distributed approximately R$3.34 million ($1.06 million) as dividends and interest on equity.

Also, the company will be distributing dividends of R$506.2 million for 2016. Of this, roughly R$282.9 million will be distributed by Jun 30 and R$223.3 million by Dec 31.

Outlook

For 2017, COPEL plans to use R$2,062.1 million in capital expenditures. Of the total, roughly R$597.5 million will be used for the Generation and Transmission business, R$629.6 million for the Distribution business and R$164.3 million for the Telecommunications business. The rest will be utilized for improving other businesses.

Companhia Paranaense de Energia (COPEL) Price and Consensus


Companhia Paranaense de Energia (COPEL) Price and Consensus | Companhia Paranaense de Energia (COPEL) Quote

Zacks Rank & Key Picks

With market capitalization of $2.3 billion, COPEL currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the utility industry include Pampa Energia S.A. PAM, Alliant Energy Corporation LNT and CenterPoint Energy, Inc. CNP. While Pampa Energia sports a Zacks Rank #1 (Strong Buy), both Alliant Energy and CenterPoint Energy carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pampa Energia’s earnings estimates for 2017 have been revised upward in the last 60 days.

Alliant Energy’s earnings estimates for 2017 and 2018 have been revised upward over the last 60 days.

CenterPoint Energy’s estimates increased for 2018, in the last 60 days. Also, it pulled a positive earnings surprise of 2.78% in the last quarter.

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