Dominion Resources (D) released fourth-quarter earnings on January 29th before the bell. They announced earnings per share of $0.72 and revenue of $4.17 billion. This is compared to earnings of $0.52 per share and revenue of $3.65 billion in the same period in 2007. This 14% increase in revenue is substantial and signs of promising things to come for Dominion.
Analysts were expecting earnings per share of $0.68 and revenue of $4.03 billion. Dominion reported year-end earnings of $3.16 per share compared to $2.56 per share in 2007.
However, this is a little misleading as net income dropped 28% to 1.83 billion. Dominion Resources, headquartered in Richmond, VA, produces and transports energy. It is made up of three business segments: Dominion Virginia Power, Dominion Generation, and Dominion Energy. Together, they hold 26,500 megawatts of generation, 6,000 miles of electric transmission lines, 55,000 miles of electric distribution lines, 42,000 of natural gas pipeline, and 1.1 trillion cubic feet equivalent of gas and oil reserves.
Inside The Numbers
Dominion's Q4 earnings resulted mainly from lower taxes and lower operating and maintenance expenses. On top of this, it had lower outage costs at its generating units. Despite the economic conditions of 2008, all of the company’s business areas met expectations. This was due in large part to a number of new projects that were either completed or launched successfully. Some of these were the completion of construction projects that will bring Virginia closer to energy independence and the approval of new pipelines that will help relieve congestion in some areas down the road.
Dominion also discussed its guidance for the future. The company expects earnings per share between $3.20 and $3.30 in 2009 and EPS between $3.33 to $3.50 in 2010. This will be driven in large part to the company’s expectations of about 30,000 new customers in 2009. Also, Dominion is confident that earnings per share will grow by at least 6% from 2011 onwards if the economy returns to normalcy.
Final Thoughts
Dominion Resources is positioned very well for success in 2009. It holds a very strong share of its market and seeks to grow this moving forward. Also, it is currently in the middle of a number of projects that will contribute to consistent bottom line growth in the upcoming years. On the electrical side of the business, there is currently no reason not to believe that Dominion will be able to continue adding capacity in the upcoming years.
In natural gas, Dominion holds a very substantial share of the Marcellus Shale in the Appalachian region. These are very low risk, long term reserves that will bring in consistent earnings in the upcoming years. Another reassuring point is that Dominion has been able to grow its earnings in four of the past five years. This is a big positive and Dominion is positioned very well to continue this success even with our current economy. We all know how bad the economy is, so it is very reassuring when a company still finds ways to beat expectations.
Of course, another big positive is Dominion’s dividend yield of 4.90%. I find it very hard to ignore companies that boast high dividends and steady growth (the utilities sector as a whole) when the markets are so volatile. This is something to remember and I’m curious to see how Dominion performs with our current economy.
-Mark Kinsella
Disclosure: None.
