01—Abstract
Summary
Summary of the 8-K filed February 22, 2024. Cited figures are marked; the original filing is the authoritative source.
Entergy (ETR) reported fourth quarter and full-year 2023 results on February 22, 2024, with a headline GAAP picture that is heavily distorted by non-recurring items.
Fourth-quarter as-reported EPS was $4.64a (net income $988 million), versus $0.51 a year earlier, but adjusted EPS was only $0.52 versus $0.51. The gap is driven almost entirely by a $568 million income tax benefit from the resolution of the 2016–2018 IRS audit, partly offset by a $(98) million regulatory provision to share those benefits with customers, along with a $106 million reversal of a Hurricane Isaac securitization liability and a $275 million benefit in Parent & Other. For full-year 2023, as-reported EPS was $11.10 against $5.37 in 2022, while adjusted EPS rose to $6.77 from $6.42.
Investors should anchor on the adjusted figures when judging the underlying earnings trajectory. Underlying performance was steady. The Utility segment's adjusted EPS rose to $8.93b from $8.20, supported by retail price increases from formula rate plans and rate case outcomes, partly offset by higher operating costs, depreciation, interest expense, and share count growth.
Parent & Other's adjusted loss widened to $(2.16) per share from $(1.78), reflecting higher interest and other costs. Operating cash flow more than doubled to $4.29 billionc from $2.59 billion, aided by lower fuel and purchased power payments and storm-related timing, while debt-to-capital (excluding securitization debt) improved to 63.5% from 66.6% and FFO-to-debt rose to 14.3% from 12.4%. Adjusted ROE declined slightly to 10.4% from 10.7%.
Management initiated 2024 adjusted EPS guidance of $7.05 to $7.35d, and highlighted the approval of Amazon Web Services' $10 billion data center complexes in Mississippi as a major future load driver. Full-year 2023 results landed in the top half of guidance for the eighth consecutive year, a point management emphasized. The main watch items going forward are regulatory outcomes, storm recovery, interest cost pressure, and whether the data center load growth translates into sustained earnings growth.
02—Key points
Key Highlights
- Q4 2023 as-reported EPS of $4.64 versus adjusted EPS of $0.52; the large GAAP gap reflects a $568 million IRS audit resolution tax benefit, partly offset by a $(98) million customer sharing provision.
- FY2023 adjusted EPS of $6.77, up from $6.42 in 2022, while as-reported EPS of $11.10 compares with $5.37 a year earlier.
- Utility adjusted EPS rose to $8.93 from $8.20 for the full year, driven by retail pricing from formula rate plans and rate actions, partly offset by higher O&M, depreciation, and interest expense.
- Parent & Other adjusted loss widened to $(2.16) per share from $(1.78), mainly due to higher interest expense and other O&M tied to business activity moved from the exited EWC segment.
- Operating cash flow of $4.29 billion for FY2023, up 66% from $2.59 billion, aided by lower fuel and purchased power payments and the absence of 2022 storm restoration spending.
- Balance sheet metrics improved: debt-to-capital excluding securitization debt fell to 63.5% from 66.6%, FFO-to-debt rose to 14.3% from 12.4%, and net liquidity was $3.34 billion.
- 2024 adjusted EPS guidance initiated at $7.05 to $7.35, with the Amazon Web Services $10 billion data center projects in Mississippi cited as a key growth driver.
03—Questions
Frequently Asked Questions
Why is Entergy's as-reported EPS so much higher than its adjusted EPS in Q4 2023?
The difference is driven mainly by a $568 million income tax benefit from resolving the 2016–2018 IRS audit, recorded in the Utility segment, plus a $275 million benefit in Parent & Other from the same audit resolution. These are excluded from adjusted earnings as non-recurring items, partly offset by a $(98) million regulatory provision to share the benefit with customers and a $106 million reversal of a Hurricane Isaac securitization liability.
What should investors use to assess Entergy's underlying earnings power?
Adjusted EPS, which excludes significant tax items and other non-recurring charges, is the better gauge of ongoing performance. Full-year 2023 adjusted EPS was $6.77 versus $6.42 in 2022, and management's 2024 guidance of $7.05 to $7.35 implies continued growth from that base.
What drove growth at the Utility segment?
Adjusted Utility EPS rose to $8.93 from $8.20 for the full year, supported by retail price increases from formula rate plans and rate case outcomes, along with regulatory actions across the operating companies. Retail electric sales were essentially flat excluding weather, with industrial sales up 0.6% on new and expansion customers, while higher operating expenses, depreciation, and interest partly offset gains.
Is Entergy's balance sheet improving?
Yes, on the metrics the company tracks. Debt-to-capital excluding securitization debt fell to 63.5% from 66.6%, FFO-to-debt improved to 14.3% from 12.4%, and parent debt as a share of total debt rose slightly to 19.8%. Total debt declined to $26.3 billion from $26.8 billion, though commercial paper increased to $1.14 billion. Adjusted ROE edged down to 10.4% from 10.7%.
What is the key long-term growth catalyst mentioned in the release?
The most significant item cited is Mississippi's approval of legislation to bring Amazon Web Services' $10 billion data center complexes to the state. This would add substantial, long-duration industrial load. The release also cites two solar facilities approved by the Louisiana PSC, adding about 225 megawatts of renewable capacity for Entergy Louisiana, and the continued execution of its resilience plan, though the timing and earnings impact of these projects were not quantified in the filing.
04—Continue