Questar (STR) Misses Q2 Earnings And Revenue Estimates

Natural gas-focused energy company, Questar Corp. (NYSE:STR) , reported adjusted second-quarter earnings of 20 cents per share that missed the Zacks Consensus Estimate of 22 cents. The quarterly earnings also decreased from the year-ago quarter adjusted profit of 23 cents per share. Seasonality of the business led to poor results for the company.

Questar reported second-quarter revenues of $174.1 million, down 12.6% from a year ago. Moreover, the quarterly revenues came in below the Zacks Consensus Estimate of $248 million.

Segment Analysis

Questar Gas:The segment generated $128.2 million in revenues, down 9.5% from the prior-year quarter, owing to seasonality of its business. As of Jun 30, 2016, Questar Gas served more than 999,000 customers, up 2.1% year over year. This helped improve margins and in turn, result in the significant improvement in operating income to $3.8 million from the year-ago quarter profit of $1.4 million.

Wexpro:Segment revenues plunged 81.2% year over year to $1.9 million in the quarter. Segmental operating income from continuing operations also fell to $39.1 million from $41.8 million in the prior-year quarter owing to lower average investment base and reduced return on contracts on new developments.

Quarterly production of natural gas was up 2.1% to 14.6 billion cubic feet (Bcf) from 14.3 Bcf.

Questar Pipeline: The segment reported revenues of $42.9 million as against $46.5 million in the comparable quarter last year. Lower transportation revenues as well as a decline in demand for energy measurement services resulted in the underperformance. Moreover, income from continuing operations declined by $2.9 million from second-quarter 2015 to $26.4 million.

Total natural gas transportation volumes were $175 million decatherms compared with 197.3 million decatherms in the second quarter of 2015.

Expenses

General and administrative expenses for the quarter declined 5.1% from second quarter 2015 to $26 million, while depreciation, depletion and amortization costs rose 5.2% to $56.4 million. Total operating expense of $109.8 million decreased from the year-ago period level of $125.4 million owing to reduced corporate allocations and employee-related costs.

Financials

As of Jun 30, 2016, Questar had long-term debt (including current portion) of $999.2 million, with a debt-to-capitalization ratio of 42.3%.

Zacks Rank

Questar – which currently carries a Zacks Rank #3 (Hold) – entered into a $4.4 billion merger deal with Dominion Resources Inc. (NYSE:D) in Feb 2016 and expects to complete the deal by the end of the year. Investors may also consider better-ranked players from the same industry like Chesapeake Utilities Corporation (NYSE:CPK) and Just Energy Group Inc. (TO:JE) . Both stocks hold a Zacks Rank #2 (Buy).