01—Abstract
Summary
Summary of the 10-Q filed November 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Entergy's Q3 2024 10-Q shows a utility-focused quarter with mixed earnings drivers.
Nine-month GAAP net income attributable to Entergy fell to $769.1 milliona from $1,368.9 million, largely because of a $317 million pre-tax pension settlement charge at Parent & Other (from a May 2024 group annuity purchase), roughly $151 million of Entergy Louisiana regulatory charges tied to a formula rate plan settlement, a $132 million Entergy Arkansas regulatory asset write-off after an adverse opportunity sales decision, and a $78 million Entergy New Orleans IRS-audit sharing charge. Third-quarter net income was $644.9 million versus $666.8 million a year earlier, with Utility earnings up and Parent & Other losses wider. Diluted EPS for the nine months was $3.58 versus $6.45, a comparison distorted by the prior-year Hurricane Ida securitization tax benefit.
Operationally, Utility retail electric sales were flat in the quarter, with industrial load up 10% offset by weaker residential and commercial sales from milder weather. Retail electric price increases from formula rate plans in Arkansas, Louisiana, and Mississippi supported revenue. Capital structure is more levered: debt-to-capital rose to 65.4% from 63.8%, and Entergy issued $1.2 billionb of junior subordinated debentures and a large volume of mortgage bonds.
Entergy plans roughly $25 billionc of Utility capital investment for 2025 through 2027, and expects to issue about $4.4 billion of equity through 2028, with about $1.4 billion already under forward sale agreements. A two-for-one stock split was announced for December 2024, and the quarterly dividend was declared at $1.20 per share. Key watch items include the pending LPSC approval of the System Energy settlement (which would resolve Grand Gulf complaints and shift 14% of Grand Gulf capacity from Entergy Louisiana to Entergy Mississippi), Hurricane Francine ($220 million to $240 million restoration costs) and Hurricane Beryl (about $85 million) recovery, growing large-load and data center generation projects, and an open SEC Division of Enforcement investigation into materials and supplies inventory accounting.
02—Key points
Key Highlights
- Nine-month GAAP EPS fell to $3.58 diluted from $6.45, reflecting a $317M pension settlement charge, a $132M Arkansas regulatory asset write-off, a $151M Louisiana formula rate plan charge, and a $78M New Orleans IRS-audit sharing charge.
- Third-quarter 2024 net income attributable to Entergy was $644.9M versus $666.8M in Q3 2023; Utility net income rose to $786.5M while Parent & Other losses widened to $141.6M.
- Utility retail electric sales were flat in Q3 (industrial up 10%, residential down 9%), and retail electric price increases from formula rate plans supported Utility operating revenues, which fell to $3.37B from $3.56B mainly due to lower fuel-related and bill-credit items.
- Debt-to-capital rose to 65.4% from 63.8%, with $2.7B of net long-term debt proceeds in the nine months and $1.2B of junior subordinated debentures issued in May 2024; the parent credit facility covenant is 65%.
- Entergy plans about $25B of Utility capital investment for 2025-2027 and expects to issue roughly $4.4B of equity through 2028, with $1.4B already under forward sale agreements.
- Large-load growth drives new generation: Entergy Louisiana filed for 2,262 MW of combined cycle capacity for a north Louisiana customer, Entergy Mississippi is building the 754 MW Delta Blues plant, and Entergy Texas is pursuing Legend and Lone Star plants with cost estimates rising.
- Hurricane Francine (estimated $220M-$240M restoration cost) and Hurricane Beryl (about $85M) create storm recovery exposure, though management considers recovery probable; a two-for-one stock split takes effect December 13, 2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 1, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $3.39B$3.60B | −5.7% |
| Operating Expenses | $2.26B$2.45B | −7.7% |
| Operating Income | $1.13B$1.14B | −1.5% |
| Interest Expense | $308.50M$264.93M | +16.4% |
| Net Income | $645.75M$669.71M | −3.6% |
| EPS (Basic) | $1.51$1.57 | −4.1% |
| EPS (Diluted) | $1.50$1.57 | −4.5% |
| Shares Outstanding (Basic) | 428.02M422.92M | +1.2% |
| Shares Outstanding (Diluted) | 431.39M424.48M | +1.6% |
05—Questions
Frequently Asked Questions
Why did Entergy's year-to-date earnings drop so sharply compared with 2023?
Nine-month 2024 net income attributable to Entergy was $769.1M versus $1,368.9M in 2023. The 2023 period benefited from a $129M income tax reduction tied to the Hurricane Ida securitization. The 2024 period absorbed a $317M pre-tax ($250M after-tax) non-cash pension settlement charge at Parent & Other, a $151M Entergy Louisiana regulatory charge, a $132M Entergy Arkansas regulatory asset write-off, and a $78M New Orleans charge. Excluding these items, underlying Utility performance was more stable.
How is the Utility business performing on sales and pricing?
Third-quarter total retail sales were flat at 35.7 TWh, with industrial sales up 10% on large petroleum refining and chlor-alkali customers and residential sales down 9% due to weather. Retail electric price increases from formula rate plans in Arkansas (January 2024), Louisiana (September 2024), and Mississippi (April and July 2024) raised revenue. Nine-month industrial sales rose 6%, driven by data center and technology demand.
Is Entergy's balance sheet becoming more leveraged, and is there covenant risk?
Yes. Debt-to-capital rose to 65.4% at September 30, 2024 from 63.8% at year-end 2023, and net debt-to-net capital excluding securitization bonds reached 64.1%. Management states it is in compliance with the 65% consolidated debt covenant in its $3B credit facility, which expires June 2029 and had $2,996M available. Future equity issuance under the at-the-market program and forward agreements is expected to moderate leverage growth.
What regulatory decisions could materially affect future earnings?
Key items include the FERC's pending approval of the System Energy settlement with the LPSC (which would resolve Grand Gulf complaints and shift Grand Gulf capacity to Entergy Mississippi from January 2025), the Entergy Arkansas opportunity sales appeal at the Eighth Circuit, the FERC decision on System Energy's return on equity and capital structure, Entergy Texas's pending Legend and Lone Star plant certification, and Entergy Louisiana's 2023 formula rate plan review, which is expected to be resolved by January 2025.
What capital growth and storm recovery exposures should investors track?
Utility capital investment is planned at about $25B for 2025-2027, including large generation additions, with Entergy Louisiana's 2,262 MW north Louisiana project and the Delta Blues and Orange County plants among the major items. Hurricane Francine restoration costs are estimated at $220M-$240M and Hurricane Beryl at about $85M. Management believes recovery is probable through storm reserves, securitization, and rider mechanisms, but timing and amounts remain uncertain pending regulatory review.
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