Demonstrating the success of its strategy to compete nationally in supplying and managing energy for businesses and utilities, Baltimore's Constellation Energy Group said yesterday that fourth-quarter profit rose 13 percent and reported record earnings for the year.
The parent of Baltimore Gas and Electric Co. also said it raised its dividend and issued optimistic forecasts through 2007, sending its stock to its highest level since May 2001.
In the three months that ended Dec. 31, net income climbed to $134.9 million, or 76 cents per share, from $119 million, or 71 cents per share, in the fourth quarter of 2003, the company said.
Excluding special items, such as the cost of cutting 108 jobs at two nuclear power plants, Constellation earned 79 cents per share in the fourth quarter, a 17.9 percent increase. Fourth-quarter revenue rose to $3.28 billion from $2.49 billion.
"We're very impressed with the quarterly results," said Ivan Feinseth, managing director of Matrix USA LLC in New York, which has rated the stock a "strong buy" since September. "We look at their economic performance as being consistently strong, with huge increases in sales growth. The risk profile is low and valuation is very low."
Earnings for 2004 climbed to $3.12 per share from $2.76 per share in 2003. That included BGE's earnings of 88 cents per share, a $2.54 contribution from the power supply and management business and a 30-cent loss from discontinued operations and other nonregulated business.
Revenue soared by nearly $3 billion, to $12.5 billion in 2004.
On Thursday, the company's board increased the quarterly common dividend by 17.5 percent to 33.5 cents per share.
Constellation Energy shares rose $3.24, or 7.1 percent, to close at $48.61 on the New York Stock Exchange.
Some analysts credited the market's upbeat reaction to the company's earnings projection of $4.75 per share to $5 per share in 2007 - the most extended projection the company has offered.
Constellation said it expects earnings of $3.35 per share to $3.60 per share this year.
"You're talking about a big jump in earnings growth between now and '07," said Robert M. Rubin, a senior electric utilities analyst with Deutsche Bank AG in New York who does not own any Constellation stock. Deutsche Bank has provided Constellation Energy with non-investment banking securities-related services in the past year.
"Constellation management is saying, 'We believe in our business. We believe in our growth prospects,' " Rubin said.
Mayo A. Shattuck III, Constellation's chairman and chief executive, said the company has met its financial goals through a transition period of expanding its power plants and building its nonutility business. The latter business sells power to businesses and utilities in competitive electric markets and manages fuels and energy services for energy-intensive industries and utilities.
"In three years, we've gone through a radical transformation, one from a local utility to a national provider of power at both the wholesale and retail levels," Shattuck said in an interview yesterday. "Now we have the platform really to compete in a much broader sense against much larger companies."
Constellation has grown into the largest competitive supplier of electricity to large commercial and industrial customers. Major customers include Kimberly-Clark Corp. and Ford Motor Co.
Constellation also became the nation's largest wholesale power seller in 2004, catapulting from the No. 13 position three years ago. The wholesale business supplies power to utilities, municipal governments and cooperatives.
The company has begun venturing into the wholesale supply of coal to utilities that run coal-fired power plants and hired 22 people to run that operation from London.
Constellation's retail business has built sales to $5.5 billion in just two years of existence, Shattuck said. In that business, Constellation brokers deals to sell power - from its own plants and others - to some 10,000 customers, including 65 Fortune 500 companies.
"The good news is that [overall company] performance has been consistent throughout the transformation," Shattuck said. "This is the 13th quarter where we've met or exceeded guidance."
Earnings have also been helped by Constellation increasing the number of its power plants, company officials said yesterday. Constellation now owns 107 plants in 11 states.
Shattuck said the company is looking to lower costs at its nuclear plants by, among other things, eliminating 108 jobs at Calvert Cliffs in Lusby and at Nine Mile Point in Lycoming, N.Y. Thirty-three employees have been laid off at Calvert Cliffs, the company said.