Stronger-than-expected sales to commercial and industrial customers, particularly firms expanding in the chemicals, transportation and oil and gas sectors, have led the leaders of Entergy Corp. to raise their 2022 sales growth forecast.
New Orleans-based Entergy booked a net profit of $276 million in the first three months of the year, which was down 17% from the same time in 2021, on revenues of nearly $2.88 billion, up slightly year over year. The company’s utility operations reported after-tax earnings of $340 million versus $357 million.
Entergy booked retail sales of 27,805 GWh, an increase of 2.6% from the same period of 2021. Residential sales slipped 2.4% as more people in the company’s service territories in Louisiana, Arkansas, Texas and Mississippi at least partly moved on from their work-from-home arrangements but commercial sales rose 2.6% and industrial demand jumped 6.5% from early last year. The company’s industrial client base grew by 4.2% to nearly 46,500.
Those numbers have led Chairman and CEO Leo Denault and CFO Drew Marsh to push their full-year retail sales growth outlook to 2% from their previous 1.8%. But the Entergy team has left alone its earnings-per-share forecast for the year because of higher interest and depreciation expenses. They are still guiding analysts and investors to a range of $6.15 and $6.45 per share compared to 2021’s $6.02.
For now, the executives also are sticking to their longer-term growth target range of 5% to 7% although Denault did hint on an April 27 conference call that those numbers may tick up in the future as Entergy weighs the “significant amount of growth opportunities” stemming from the projected needs of its customer base.
“At a minimum, that makes the runway pretty long for us in terms of where we are with the current outlooks,” Denault said after discussing the tailwinds coming from a possible acceleration of renewables investments, growth in Entergy’s industrial client base and broader electrification pushes. “Our objective would certainly be to have a better outlook […] The work we need to do is to find a way to make it better.”
A specific catalyst for growth in the near and medium term is the heightened global interest in liquified natural gas projects following Russia’s invasion of Ukraine. The Gulf Coast region is primed to draw a lot of investment dollars in LNG infrastructure and Entergy stands to be a beneficiary. Marsh said on the conference call that active LNG customers had “extremely high” Q1 utilization rates and Utility Operations Group President Rod West noted that about 85% of proposed projects nearing a final decision are in Entergy’s service area.
“Our customers have a unique growth story and our ability to serve them … remains a growth opportunity for us,” West said.
Also discussed on the call were:
• Entergy’s pending exit from the merchant nuclear energy business through its sale of Palisades Nuclear Plant in Michigan to a subsidiary of Holtec International. Denault said there’s no going back on that decision despite the recent U.S. Department of Energy announcement that it will commit up to $6 billion to help distressed plants stay online. Entergy has been working on its Palisades plan for five years, Denualt noted, and has not purchased fuel for the plant beyond next month.
“We couldn’t be more supportive of this act,” Denault said of the government’s initiative. “I’m encouraged by what the DOE has going on with future plans. But just with Palisades specifically, it’s a really heavy lift” to keep it running.
• The supply constraints in the solar energy industry that have pushed back project timelines and inflated their budgets. The Entergy team said a few of the company’s projects will likely be affected but added that they aren’t material to its results and that the majority of its planned investments in solar are slated for the second half of this decade, when the supply situation is expected to be more favorable.
Shares of Entergy (Ticker: ETR) were up slightly to about $121 in afternoon trading April 27. Year to date, they’ve risen about 10%, growing the company’s market capitalization to about $25 billion.