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PUBLIC SERVICE CO OF NEW MEXICO (PNMXO)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered strong GAAP results: revenue rose to $569.26M and GAAP diluted EPS jumped to $1.45; ongoing diluted EPS was $1.43, reflecting lower weather impacts and depreciation tied to new investments .
  • Guidance narrowed: FY 2024 ongoing EPS tightened to $2.70–$2.75 from $2.65–$2.75 previously; midpoint maintained, low end raised $0.05, signaling management confidence into year-end .
  • Segment mix: PNM drove the quarter (ongoing EPS $1.18), while TNMP was steady at $0.39; Corporate/Other remained a modest drag at ($0.14) ongoing EPS .
  • Regulatory catalysts: Approval of PNM’s Grid Modernization Plan and settlements in TNMP’s System Resiliency Plan and PNM’s rate case improve visibility for investment recovery and rate phasing through 2025–2026 .
  • Note: Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue was unavailable at the time of writing; estimate-based beat/miss assessments are not provided due to data access limitations.

What Went Well and What Went Wrong

What Went Well

  • Robust GAAP performance: Q3 GAAP net earnings rose to $131.2M and GAAP diluted EPS to $1.45; operating income nearly doubled YoY to $191.08M with stronger investment securities gains .
  • Strategic progress: “We’re pleased with our third quarter results… The recent approval of PNM’s Grid Modernization Plan moves New Mexico forward… commitment to a reliable and resilient grid,” said CEO Pat Vincent-Collawn, highlighting modernization tools across NM and TX .
  • Strength at PNM: Ongoing EPS of $1.18 vs. $1.19 last year despite lower transmission margins; new retail rates and better trust performance supported results .

What Went Wrong

  • Weather headwinds: Both PNM and TNMP noted “lower weather impacts” in Q3, reducing load benefits and offsetting rate recovery .
  • Persistent margin pressure: Lower transmission margins and higher depreciation from new capital investments weighed on PNM; TNMP faced depreciation, property taxes, and interest expense tied to growth capex .
  • Corporate drag: Ongoing losses increased on lower NMRD income post sale and higher variable-rate interest despite hedges; additional December 2023 share issuance diluted per-share metrics .

Financial Results

Consolidated Revenue and EPS

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Electric Operating Revenues ($USD Millions)$505.85 $436.88 $488.10 $569.26
GAAP Diluted EPS ($)$0.44 $0.52 $0.53 $1.45
Ongoing Diluted EPS ($)$1.54 $0.41 $0.60 $1.43

Profitability and Margins

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Operating Income ($USD Millions)$86.65 $80.59 $105.70 $191.08
Net Earnings Attributable ($USD Millions)$37.73 $47.19 $48.00 $131.20
Net Income Margin %7.5% (derived from 37.73/505.85) 10.8% (derived from 47.19/436.88) 9.8% 23.0% (derived from 131.20/569.26)

Segment EPS Breakdown

Segment EPS ($)Q3 2023 GAAPQ3 2023 OngoingQ3 2024 GAAPQ3 2024 Ongoing
PNM$0.09 $1.19 $1.20 $1.18
TNMP$0.46 $0.46 $0.39 $0.39
Corporate & Other($0.11) ($0.11) ($0.14) ($0.14)
Consolidated$0.44 $1.54 $1.45 $1.43

Segment Ongoing Earnings ($USD Millions)

SegmentQ3 2023Q3 2024
PNM$102.87 $106.45
TNMP$39.40 $35.70
Corporate & Other($9.32) ($12.80)
Consolidated$132.95 $129.34

KPIs and Cost Structure (Q3)

KPI ($USD Millions unless noted)Q3 2023Q3 2024
Cost of Energy$210.31 $138.91
Depreciation & Amortization$80.19 $97.40
Taxes Other Than Income Taxes$22.43 $25.97
Interest Charges$49.84 $59.66
Gains (Losses) on Investment Securities($8.40) $13.77
Dividends Declared per Common Share ($)$0.3675 $0.3875
Average Diluted Shares (units)86,129,744 90,605,188

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Ongoing EPSFY 2024$2.65–$2.75 $2.70–$2.75 Narrowed range; low end raised by $0.05
Dividend per Common Share (Quarterly)Q3 2024 vs. Q3 2023$0.3675 (Q3’23) $0.3875 (Q3’24) Raised $0.02
PNM Rate Case Parameters2025–2026 phasingRequest: $174.3M increase; ROE 10.45%; 52.5% equity Stipulated: $105.0M increase; ROE 9.45%; 51% equity; phased 7/1/2025 and 4/1/2026 Lower than request; improved rate visibility
TNMP System Resiliency Plan2025–2027Filed SRP totaling $600M capex + $151M related costs Settlement in principle; hearing canceled to finalize settlement Advancing toward settlement and recovery pathway

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2024)Trend
Grid Modernization (PNM)Q2: highlighted upcoming grid modernization; name change to TXNM to reflect evolving profile . Q1: strategic goals and reliable, clean energy focus .Approval of PNM’s Grid Modernization Plan; enabling strategic investments benefiting customers .Progressing; regulatory support in place
Weather ImpactsQ2: hotter weather aided PNM; overall ahead of expectations . Q1: load growth offset by weather; lower transmission margins vs Q1’23 .Lower weather impacts at both PNM and TNMP, offsetting rate recovery .Volatile; negative in Q3
Transmission MarginsQ2: lower transmission margins due to market prices . Q1: lower transmission margins vs. prior-year market price environment .Lower transmission margins continued to weigh on PNM .Persistent headwind
Capex & DepreciationQ2: higher depreciation tied to new capital investments . Q1: new depreciation rates from retail rates; elevated depreciation .New depreciation rates and higher depreciation on new investments continued .Elevated; investment cycle ongoing
TNMP ResiliencyQ2: preview of SRP filing .SRP filed (Aug 29) and settlement in principle reached (Nov 19) .Advancing toward settlement and recovery mechanisms

Management Commentary

  • “We’re pleased with our third quarter results… The recent approval of PNM’s Grid Modernization Plan moves New Mexico forward… commitment to a reliable and resilient grid to meet our customers’ energy needs across New Mexico and Texas.” — Pat Vincent-Collawn, Chairman & CEO .
  • “Results for the second quarter and first half of the year are ahead of expectations… opportunities to invest and advance our grid infrastructure, including the System Resiliency Plan… and Grid Modernization at PNM.” — Pat Vincent-Collawn, Q2 release .
  • “Our first quarter results exceeded expectations… remain focused on delivering reliable and clean energy for our customers and communities.” — Q1 release .
  • Prepared remarks referenced “ongoing earnings for the third quarter are $1.43 per share, reflecting some warmer weather and timing impacts,” framing the driver mix in the quarter .

Q&A Highlights

  • Weather and timing impacts: Management acknowledged Q3 ongoing EPS of $1.43 reflected “some warmer weather and timing impacts,” indicating mixed exogenous effects on load and earnings cadence .
  • Guidance clarity: Narrowing FY 2024 ongoing EPS to $2.70–$2.75 emphasized year-to-date visibility and confidence while acknowledging depreciation and transmission margin headwinds .
  • Regulatory trajectory: Updates around PNM’s rate request stipulation (ROE 9.45%, 51% equity, phased-in increases) and TNMP SRP settlement in principle provided a clearer recovery path and rate timing into 2025–2026 .
  • Share count dilution: Management noted additional shares issued in December 2023 reduced GAAP and ongoing EPS, a factor analysts probed for per-share trajectory .

Estimates Context

  • S&P Global (SPGI) consensus EPS and revenue estimates for Q3 2024 were unavailable due to access limitations at the time of analysis; as a result, estimate-based beat/miss assessments for Q3 are not provided. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • Strong Q3 GAAP performance with revenue up to $569.26M and GAAP EPS at $1.45; ongoing EPS at $1.43 indicates resilient core operations despite weather and margin headwinds .
  • Guidance tightening (FY 2024 $2.70–$2.75 ongoing EPS) signals improved visibility and discipline into year-end; watch for year-end reconciliation of non-GAAP adjustments and share count effects .
  • Regulatory momentum is constructive: PNM Grid Modernization approval, TNMP SRP settlement in principle, and PNM rate case stipulation (lower than original request) enhance rate stability and investment recovery prospects in 2025–2026 .
  • Tactical trading lens: Near-term narrative favors grid modernization and regulatory clarity; any incremental updates to transmission margins or weather outlook could sway sentiment given their recurring impact on quarterly earnings .
  • Medium-term thesis: Elevated depreciation from capex and prudent rate design (phased-in increases) should support earnings durability; monitoring variable-rate debt exposure and hedging remains key for Corporate/Other drag mitigation .
  • Segment focus: PNM remains the primary earnings driver; TNMP steady but sensitive to weather; continued filings (TCOS/DCRF and SRP) underpin its recovery of investments .
  • Dividend trajectory: Q3 2024 declared dividend per common share increased vs. Q3 2023 ($0.3875 vs. $0.3675), aligning with earnings and cash flow stability .

Notes:

  • TXNM Energy completed a holding company name change from PNM Resources in August 2024; PNM (Public Service Company of New Mexico) and TNMP remain subsidiaries, underpinning the consolidated results reviewed herein .