01—Abstract
Summary
Summary of the 8-K filed April 24, 2024. Cited figures are marked; the original filing is the authoritative source.
Entergy (NYSE: ETR) reported first quarter 2024 as-reported EPS of $0.35a (net income of $75 million), down from $1.47 in Q1 2023, while adjusted EPS came in at $1.08 versus $1.14 a year earlier.
The as-reported decline is driven primarily by non-recurring items: a $132 millionb ($97 million after-tax) write-off of an Entergy Arkansas regulatory asset tied to the opportunity sales proceeding, and a $79 million ($57 million after-tax) regulatory charge at Entergy New Orleans for sharing 2016–2018 IRS audit tax benefits with customers. Both are excluded from adjusted earnings. Adjusted Utility EPS actually rose to $1.64 from $1.55, while Parent & Other was a drag at $(0.56), consistent with the prior year's $(0.41).
Management affirmed 2024 adjusted EPS guidance of $7.05 to $7.35c and emphasized recent regulatory progress, including an agreement in principle with the Council of the City of New Orleans (CCNO) to resolve all of its complaints against System Energy Resources (SERI), subject to FERC approval, and Louisiana PSC approval of the first phase of a $1.9 billion resilience and grid hardening plan with timely cost recovery. S&P revised SERI's outlook to positive and affirmed ratings following the CCNO agreement. Balance sheet metrics were mixed.
Debt-to-capital excluding securitization debt improved to 65.6% from 67.2%, and FFO-to-debt rose to 13.2% from 11.4%. However, liquidity tightened, with net liquidity down to $3.6 billiond from $5.3 billion, largely because commercial paper rose to $1.9 billion from $0.9 billion.
Operating cash flow fell to $521 million from $960 million, mainly due to lower customer receipts and the timing of vendor payments. Weather-adjusted retail sales were essentially flat.
02—Key points
Key Highlights
- As-reported Q1 2024 EPS of $0.35 vs. $1.47 in Q1 2023; adjusted EPS of $1.08 vs. $1.14, with $(0.72) per share of adjustments, mainly the $132M Entergy Arkansas regulatory asset write-off and the $79M Entergy New Orleans tax-sharing charge.
- Adjusted Utility EPS rose to $1.64 from $1.55, driven by regulatory actions across operating companies, higher retail electric prices, and higher other income, partly offset by higher O&M and depreciation.
- Affirmed 2024 adjusted EPS guidance of $7.05 to $7.35 per share, with no change to the outlook.
- Regulatory progress: SERI reached an agreement in principle with the CCNO resolving all complaints (subject to FERC approval), and the LPSC approved the first phase of a $1.9B Entergy Louisiana resilience plan with timely cost recovery.
- Operating cash flow fell 46% to $521M from $960M, reflecting lower customer receipts and timing of vendor payments.
- Net liquidity declined to $3.6B from $5.3B as commercial paper borrowings rose to $1.9B from $0.9B, while cash fell to $1.3B from $2.0B.
- Credit metrics improved: debt-to-capital ex-securitization fell to 65.6% from 67.2%, and FFO-to-debt ex-securitization rose to 13.2% from 11.4%; S&P revised SERI's outlook to positive.
03—Questions
Frequently Asked Questions
Why did Entergy's as-reported EPS fall so sharply in Q1 2024?
The decline was driven mainly by two non-recurring items excluded from adjusted earnings: a $132 million ($97 million after-tax) write-off of an Entergy Arkansas regulatory asset tied to the opportunity sales proceeding, and a $79 million ($57 million after-tax) regulatory charge at Entergy New Orleans for sharing 2016–2018 IRS audit tax benefits with customers. Together these reduced as-reported EPS by $0.72. Adjusted EPS fell only modestly, to $1.08 from $1.14.
Is Entergy still on track to meet its 2024 earnings guidance?
Yes. Entergy affirmed its 2024 adjusted EPS guidance range of $7.05 to $7.35. The company said it cannot reconcile this non-GAAP guidance to GAAP because it cannot predict all future adjustments, which could include regulatory charges tied to complaints or significant income tax items.
What does the CCNO settlement mean for investors?
SERI reached an agreement in principle with the Council of the City of New Orleans to resolve all of its complaints against SERI. The settlement still requires FERC approval. Resolving the complaints reduces regulatory uncertainty, and S&P responded by revising SERI's outlook to positive and affirming its ratings.
Is Entergy's liquidity or cash flow a concern?
Some pressure is visible. Operating cash flow was $521 million versus $960 million a year earlier, largely from lower customer receipts and vendor payment timing. Net liquidity fell to $3.6 billion from $5.3 billion as commercial paper rose. Leverage metrics improved, however, with debt-to-capital ex-securitization at 65.6% and FFO-to-debt at 13.2%, both better than a year ago.
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