Dominion Energy (D 1.12%) capped a solid year by reporting fourth-quarter results just above the middle of its forecast. That pushed full-year profits to $3.60 per share, which was just below the midpoint of its guidance range of $3.40 to $3.90 per share. That solid result came despite another year where the weather was well off normal levels, which reduced demand for electricity and natural gas. That said, the company expects the weather to return to normal this year, which when combined with several other factors, should push earnings much higher in 2018.
Dominion results: The raw numbers
|
Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
| Operating earnings |
$585 million |
$618 million |
(5.3%) |
|
Operating EPS |
$0.91 |
$0.99 |
(8.1%) |
Data source: Dominion Energy.
Image source: Getty Images.
What happened with Dominion this quarter?
Dominion ended 2017 within expectations:
- Even though Dominion's operating earnings were lower than the year-ago quarter, they were slightly above the mid-point of the company's $0.80 to $1.00 per share guidance range. Lower profits from the company's power generation business and an increase in the loss from corporate and other activities drove the year-over-year decline.
- Meanwhile, full-year operating earnings came in close to the middle of the company's guidance range, though they were $0.20 per share, or 5.3%, below 2016's results. Several factors contributed to the lower result, including milder weather across its service territory, a decrease in solar investment tax credits, a second refueling at its Millstone nuclear power plant, and a reduction in import contract revenues from its Cove Point terminal.
What management had to say
CEO Tomas Farrell commented on the company's progress last year, saying:
We achieved strong financial results for 2017 and reported operating earnings of $3.60 per share in the middle of our guidance range, despite weather that was significantly below normal. Construction of the 1,588-megawatt Greensville County combined cycle power station continues on time and on budget. The project is approximately 73% complete and is expected to begin commercial operations in late 2018. We recently received a Limited Notice to Proceed from FERC for the Atlantic Coast Pipeline and the Supply Header Project which allows us to remain on schedule for completion of the projects in the second half of 2019. Cove Point Liquefaction construction is complete, and we are in the final stages of commissioning. And finally, in December the Dominion Energy Board of Directors established a 2018 dividend of $3.34 per share, subject to quarterly determination and declaration, that represented a 10% year-over-year increase.
Last year was an important one from a strategic standpoint for Dominion. That's because the company made significant headway on the construction of its three major expansion projects, including finishing up its Cove Point liquified natural gas (LNG) export terminal. The start-up of that facility should fuel significantly higher earnings in 2018, while its other two projects set it up for more growth in the coming years.
Looking forward
Due in part to the impact of Cove Point, as well as the anticipation that weather conditions will return to normal, Dominion expects operating earnings to rise to a range of $3.80 to $4.25 per share in 2018, up 11.8% at the midpoint from 2017. That growth should begin materializing in the first quarter when the company expects earnings to be in the range of $0.95 to $1.15 per share, up 8.2% at the mid-point from the first quarter of last year.
In addition to that organic growth, the company announced earlier this year that it agreed to buy troubled South Carolina-based utility SCANA (SCG) for $14.6 billion. That deal has the potential to accelerate Dominion's long-term earnings growth rate from 6% to 8% annually through 2020 up to an 8%+ yearly rate over that timeframe. That said, the company faces an uphill battle because the state's Governor doesn't want SCANA ratepayers to be on the hook for any of the costs associated with the company's failed nuclear project. While Dominion has offered to refund most of the money customers paid into the abandoned facility and cut rates by one-fifth, that might not be enough to win approval.
