On June 6 Piedmont Natural Gas (PNY) announced a 16 percent growth in profit for its second fiscal quarter, ended on April 30. The Company's Board of Directors also declared their intention to pay a quarterly dividend on common stock of 32 per share to holders of record on June 24.
Piedmont Natural Gas is a Charlotte, N.C.-based national natural gas distributor. Its major served areas include North Carolina, South Carolina and Tennessee, with over one million residential and industrial customers as well as more than 50,000 wholesale customers.
For the quarter, the report showed a 16 percent rise in operating revenues from preceding year’s $399.41 million to $462.25 million. The net income climbed to $62.54 million or $0.80 per diluted share, compared to $55.79 million or $0.74 per share in the same period of previous year.
Analysts were expecting a profit of $0.74 per share on revenues of $427.95 million.
Big Increases in Revenue and Earnings
According to the Piedmont Natural Gas earnings report, Operations and maintenance expenses increased 8 percent from $65.0 million to $70.2 million, primarily due to its higher payroll, increased regulatory, as well as overtime and incentive plan accruals.
The utility interest charges notably rose from $3.3 million to $ 12 million majorly because of lower construction expenditures in 2014. An increase in the interest expense on long-term debt due to higher amounts outstanding this year also contributes to the utility interest charges growth.
The company is in a good place with sustainable and steady development in every aspect. The quarterly sales grow notably 27.50 percent, though, but in the big picture, the annual sales in the past 5 years have dropped 9.40 percent. However, recent years saw a steady growth in its customer base and the latest Q2 indicated a 22 percent growth during the quarter, with a 19 percent increase in new residential construction.
The company’s board of directors emphasizes the achievement of customer growth. Chief Commercial Officer Frank Yoho said, “We’re seeing really strong trends, really continuing heavy trends and recovery in the market specifically the residential new construction.” He said it was not dramatic, but anticipated that the trend would continue in the future.
SouthStar Contributes to Growth
Piedmont Natural Gas’ joint venture SouthStar Energy Services also contributed to the rate growth to a large extent, because of SouthStar Energy’s new Illinois customer base as well as a favorable customer mix and price spreads in Georgia. With such a good showing, it is reasonable to see a 15 percent growth in earnings from Piedmont Natural Gas’ joint ventures.
Piedmont Natural Gas stands out in this strong industry with steady development. The company’s new pipeline project proposed in April is certainly another reason that makes itself a safe stock pick. In April Piedmont Natural Gas announced with Duke Energy request for proposals for a second major wholesale natural gas pipeline into North Carolina to supply Carolinas and possibly surrounding state.
The project would support Piedmont’s growing core customer demand and Duke's new power generation demand. The company seeks initial pipeline capacity of 900 million cubic feet per day. Thomas E. Skains, Chairman, President and Chief Executive Officer, said they expect to receive the initial bids next Wednesday the work through the project details by the end of the year. The in-service date is expected to occur in late 2018.
Another notable move is Piedmont Natural Gas’s announcement of agreement with Duke Energy to serve their W.S Lee Power Generation facility near Anderson, South Carolina with a construction of a new natural gas pipeline and associated compression.
Looking forward, Piedmont reiterated expected earnings $1.80 to $1.90 per share for the next year.
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