Report: Many energy companies did not make adjustments to year-end earnings outlook

NORTHBROOK, IL, November 27, 2001 – Energy companies endured a very tough third quarter, as did most companies across the country. Although many companies faced a drop in stock price, MCR analysis indicates that a majority of companies did not make any adjustments to their year-end earnings outlook.

Yet, when separating energy companies into distinct groups based on their strategy, significant differences can been seen in both the behavior of their stock prices as well as company views on their end-of-year outlook.

MCR has identified the importance of comparing the estimated earnings growth of energy companies or their business units against that of true peer group companies, rather than lumping all energy companies together. The MCR Energy Index, (found at www.mcr-group.com) has divided gas and electric utilities into three utility peer groups:

* Merchant/Marketer–Companies have significant commitment to unregulated energy commodity marketing, power plant development, or overseas investment.

* Traditional/Integrated–Utilities still invested in generation, but have not made a significant commitment to new merchant plant development; have some energy marketing initiatives, but is dwarfed by core-regulated electric and gas businesses; have little or no international asset investment; and have only modest unregulated investments as compared to revenues and value of regulated businesses.

* Distribution–Companies including gas utilities and those electric utilities which have sold off their generation assets or have announced plans to sell those assets.

Additionally, the MCR Energy Index is building a fourth Group–High Tech, which includes companies producing equipment used in distributed and on-site generation.

It is particularly interesting to note how these Groups of companies fare under various economic conditions, such as those experienced recently. The latest MCR Energy Index analysis, “Earnings Announcements and Stock Prices–A Third Quarter Assessment of the MCR Energy Index,” studies two key performance factors: stock price and earnings outlook. It found that more Traditional/Integrated companies lowered their earnings guidance over the quarter than did companies belonging to other Groups. The analysis also notes that companies implementing a Merchant/Marketer strategy experienced sharper reductions in their stock prices.

For more information about the MCR Energy Index, visit http://www.mcr-group.com.

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