In 2016 Emera acquired a quite large American utility called Teco;it had divisions in Florida, New Mexico.Maine and the Carribbean.It had total assets of about $8 to $10 billion.And now Emera which is headquartered in Nova Scotia has total assets of about $29 billion.And late in 2017 it invested about $1 billion in it's Maritime Link connecting Newfoundland and Maine to it's grid.But these large projects take a bit of time to properly digest .Consequently 2017 showed inconsistent results but 2018 is off to a better start.
The first quarter 2018
As the various divisions of Teco become integrated within the Emera system the earnings are starting to improve.Although the net income was only $271 million compared to $312 million in Q1 2016.More importantly adjusted net income improved to $202 million from $152 million in 2017.That is because accounting adjustments are being minimized.Consequently adjusted earnings per common share were $.87 compared to $.72 per share in 2017 for a 22% increase.With the improved system and earnings this blog sees adjusted earnings per common share on track to hit $3.50 to $3.90 per common share for all of 2018.Which end of the earnings'range will depend on the profitability of their new Maritime Link mentioned above.For example, the Maritime Link earned $15 million in Q1. and this number is expected to increase in Q2.
Divisional Results
Emera now has 5 main divisions;(1)Florida and New Mexico,(2)Nova Scotia Power,(3) Maine,(4)New England and (5) Caribbean.The largest increase was recorded by the Florida-New Mexico division and New England but there was a substantial contribution from Nova Scotia Power.And as mentioned previously a small contribution from the Maritime Link.Future gains are expected from Florida-New Mexico,Maine and the Maritime Link.This should bring earnings per common share to the range of $4.75 to $5.00 and adjusted earnings per share to the $3.50 to $3.90 range.
Annual Results
Annual results have been inconsistent since 2015.The general trend is that net income has risen over this period but 2016 and 2017 have not moved with trend.In addition, some quarters have shown negative results while others have been above trend.Part of the reason is that Teco was so big;it was close to 50% of the value of Nova Scotia Power.Secondly it was so spread out;part in New England and part in New Mexico and another part in Florida.It takes time to manage such a well spread out giant but this blog suspects that the amount of investment required to make Teco run smoothly was more than originally counted on.On the other hand,adjusted EBITDA has moved up considerably since 2015.And now e.p.s. has started to move towards the upward trend.The earnings projection of $3.50 to $3.90 per share is based on no extraordinary items and Emera has minimized these items gradually.At $3.50 per share this would put their P/E ratio at a reasonable 12 times earnings.
The 2018 Price
With the Teco acquisition completed the CEO stated that there would be a dividend increase every year until 2019(see Blogdaleupsome-Blogger.com dated 24/08/2017)Emera states that "operating cash flow increased $96 million,or 28% to $444 million in Q1 2018."This leaves lots of room for a 7% increase.There is little doubt that Emera has improved their operations so a corresponding price increase to the $48 range should not be much of a surprise.But it will be a slow rise. https://www.credit-suisse.com/ca/en.html ;https://www.brookfield.com/
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