Actions of utility CenterPoint Energy (NYSE: CNP) rose nearly 20% when the market opened on May 7 before settling at a gain of around 11% at 11:30 a.m. EDT. The big news of the day was the release of the company’s earnings, but it wasn’t your regular recap from the previous quarter.
CenterPoint posted a loss of $ 2.44 per share in the first quarter of 2020 compared to a profit of $ 0.28 in the same period of 2019. It’s terrible from any point of view. But there are a few caveats, including about $ 1.6 billion in depreciation charges taken in the quarter just ended. These expenses mainly concern the intermediate segment of the company, which consists of a participation in Activate intermediary partners. Intermediate partnership units are down almost 80% from their peak in mid-2018. This is where things get interesting.
At the same time as it released its results, CenterPoint sent out a separate piece of news that announced a $ 1.4 billion equity investment by a consortium including, among others, partners Elliott Management, Fidelity and Bluescape Energy. The cash injection should be used to repay debt and help fund future spending plans. The utility also announced two new board members and a full review of the business that is expected to be completed by October 2020. Coupled with the steep depreciation, it appears CenterPoint is looking to reset the business so that ‘it may operate from a less clean) slate in the future. Investors seem to like the idea.
CenterPoint’s adjusted earnings were $ 0.65 per share compared to adjusted earnings of $ 0.46 in the same quarter of 2019. That’s not bad, but the real story here isn’t earnings, it’s investing in equities and the corporate overhaul that is likely to take shape now that there is activist investors on board (literally and figuratively). Conservative investors should probably sit on the sidelines here until the full review is complete and there is a clearer perspective on what the future holds. However, it’s pretty obvious given the stock market action after the announcement that investors believe the future is brighter than it was just a few days ago.
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