01—Abstract
Summary
Summary of the 8-K filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Entergy (ETR) reported second quarter 2024 as-reported EPS of $0.23a (net income of $49 million), down sharply from $1.84 a year earlier, while adjusted (non-GAAP) EPS was $1.92, up from $1.84.
The headline GAAP decline is driven by two non-recurring items: a $(150) million pre-tax regulatory charge (about $(112) million after tax in the Utility segment) tied to Entergy Louisiana's agreement in principle with LPSC Staff, which includes $184 millionb of customer rate credits, and a $(317) million pre-tax (about $(250) million after tax) non-cash pension settlement charge from a May 2024 group annuity purchase (the "pension lift out"). Excluding these adjustments, the Utility segment's adjusted EPS rose to $2.58 from $2.42, supported by higher retail sales (weather-adjusted retail sales up 2.9%, led by industrial growth) and regulatory actions, partly offset by higher O&M, depreciation, and interest expense. Management affirmed 2024 adjusted EPS guidance of $7.05 to $7.35, and the quarter brought several regulatory and growth milestones.
These include the Entergy Louisiana agreement in principle to extend and modify its formula rate plan, an agreement in principle that substantially resolves major litigation at System Energy Resources (SERI), MPSC approval of Entergy Mississippi's FRP settlement, Entergy Texas's CCN filings for roughly 1,200 MW of new gas and 311 MW of solar capacity, and a joint development agreement with NextEra Energy Resources for up to 4.5 GW of utility-owned solar and storage. Several of these settlements remain subject to LPSC and FERC approval, so their final terms and timing are still uncertain. Balance sheet metrics show leverage improving on an adjusted basis while liquidity and cash flow strengthened versus the prior year.
Adjusted debt to adjusted capitalization fell to 64% from 67%, FFO to adjusted debt rose to 13.8% from 11.7%, and gross liquidity reached $5.7 billionc. Total debt rose to $28.8 billion, reflecting $1.2 billion of junior subordinated debentures issued in May 2024 and higher commercial paper balances earlier in the period.
Trailing-twelve-month as-reported ROE was 12.8%d, while adjusted ROE was 10.4%. Investors should note that the company's GAAP and non-GAAP results diverge materially this quarter, so the adjusted figures are the company's primary measure of ongoing performance.
02—Key points
Key Highlights
- Q2 2024 as-reported EPS of $0.23 (net income $49M) vs. $1.84 in Q2 2023; adjusted EPS of $1.92 vs. $1.84, up 4%.
- Pre-tax $(317)M non-cash pension settlement charge from the May 2024 pension lift out (about $(250)M after tax, or $(1.17)/share) excluded from adjusted earnings.
- Entergy Louisiana agreement in principle with LPSC Staff recorded $(150)M pre-tax regulatory charge ($184M total customer credits), subject to LPSC approval; adjusted EPS impact of $(0.52).
- 2024 adjusted EPS guidance of $7.05 to $7.35 affirmed; YTD adjusted EPS of $2.99 was flat versus prior year.
- Utility adjusted EPS rose to $2.58 from $2.42, driven by higher weather-adjusted retail sales (+2.9% in the quarter) and retail pricing, partly offset by higher O&M, depreciation, and interest costs.
- Balance sheet strengthened on adjusted metrics: adjusted debt-to-capitalization improved to 64% from 67%, FFO-to-adjusted-debt rose to 13.8% from 11.7%, and gross liquidity was $5.7B.
- Growth pipeline advanced: E-TX filed CCNs for the Legend and Lone Star gas plants and 311 MW of solar, a NextEra JDA covering up to 4.5 GW of solar and storage, and a Phase I $335M resiliency plan.
03—Questions
Frequently Asked Questions
Why did Entergy's GAAP earnings fall so sharply in Q2 2024?
Two non-recurring items drove the decline: a $(317) million pre-tax pension settlement charge tied to a May 2024 group annuity purchase, and a $(150) million pre-tax regulatory charge tied to Entergy Louisiana's agreement with LPSC Staff. Together they reduced as-reported EPS by about $1.69 per share, and the company excludes them from adjusted EPS.
Is Entergy still on track to meet its 2024 earnings guidance?
Yes. Management affirmed its 2024 adjusted EPS guidance range of $7.05 to $7.35. Year-to-date adjusted EPS was $2.99, the same as the prior year, so the company will need stronger second-half results to reach the guidance range. The company has not provided GAAP guidance because it cannot reliably forecast all potential adjustments.
What are the pending regulatory settlements and what could change?
The Entergy Louisiana agreement would extend and modify its formula rate plan, set the 2023 test-year base rate change, and provide $184 million in customer credits. A SERI litigation settlement also requires LPSC and FERC approval, and the Entergy Mississippi FRP settlement has already been approved by the MPSC. Final terms or timing could differ from the agreements in principle, which would affect the reported charges and future earnings.
How is Entergy's balance sheet and liquidity positioned?
Adjusted leverage improved, with adjusted debt to adjusted capitalization at 64% versus 67% a year earlier and FFO to adjusted debt at 13.8% versus 11.7%. Gross liquidity was $5.7 billion. Total debt rose to $28.8 billion, largely from $1.2 billion of junior subordinated debentures issued in May 2024 and a shift in commercial paper, so interest expense is rising.
What growth opportunities did Entergy highlight?
Entergy highlighted a joint development agreement with NextEra Energy Resources for up to 4.5 GW of utility-owned solar and storage, Entergy Texas CCN filings for the 754 MW Legend carbon-capture-enabled combined-cycle plant, the 453 MW Lone Star combustion turbine, and 311 MW of owned solar, and a state RFP process for up to 3 GW of renewables. These projects are at the filing and approval stage, so their earnings contribution depends on regulatory approvals and construction timelines.
04—Continue