Executive Summary

Q2 2023 ongoing EPS was $0.55 and GAAP diluted EPS was $0.53; revenue was $477.16M, with a revenue beat vs consensus and a slight EPS miss versus S&P Global consensus; management affirmed FY23 ongoing EPS guidance of $2.65–$2.75 per share .
Revenue outperformed Street by ~6.8% ($477.16M actual vs $446.75M consensus), while normalized EPS of $0.55 was ~~1.8% below $0.56 consensus, reflecting higher O&M, depreciation, property taxes, and interest expense offsets to margin gains **[https://www.txnmenergy.com/~~/media/Files/P/PNM-Resources/quarterly-results/2023/PNM%20Resources%20Inc_Earnings%20Call_2023-08-04.pdf]**.
Segment drivers: PNM benefited from higher transmission margins and improved decommissioning trust performance; TNMP saw rate recovery and load growth but was offset by milder temperatures and higher planned O&M; Corporate losses increased on higher variable-rate interest despite hedges .
Management highlighted constructive Texas legislative developments on grid reliability/resilience and “new system peaks” at TNMP and PNM as catalysts for continued investment; the quarter’s stock narrative centered on regulatory progress and capital deployment visibility while merger appeal timelines remained pending .

What Went Well and What Went Wrong

What Went Well

“This first half of the year has laid the groundwork for future growth, particularly in Texas where a constructive legislative session called for investments in grid reliability and resilience” — Pat Vincent-Collawn (Chairman & CEO) .
PNM transmission margins improved on higher system demand; reduced gas plant outages and generation portfolio changes lowered costs; decommissioning and reclamation trusts’ market performance improved YoY .
TNMP delivered rate recovery (TCOS/DCRF) and weather-normalized load growth, supported by ongoing capital investments and filings to recover increased rate base .

What Went Wrong

At TNMP, depreciation, property tax, and interest expense from new capital investments, plus milder temperatures and higher planned O&M, more than offset rate recovery and load growth .
Corporate and Other losses widened given higher interest rates on variable-rate debt (net of hedges) .
Q2 normalized EPS modestly missed consensus ($0.55 vs $0.56), reflecting cost pressures and lower customer usage at PNM in part due to milder temperatures, despite underlying demand strength .

Financial Results

Revenue, EPS, Margins: Prior Quarter/Year and Estimates

Metric	Q4 2022 (oldest)	Q1 2023	Q2 2023 (newest)
Electric Operating Revenues ($USD Millions)	N/A	$544.08	$477.16
GAAP Diluted EPS ($)	$0.15	$0.64	$0.53
Ongoing/Normalized EPS ($)	$0.15	$0.55	$0.55
Revenue Consensus ($USD Millions)	N/A	N/A	$446.75
EPS Normalized Consensus ($)	N/A	N/A	$0.56
Operating Income ($USD Millions)	N/A	N/A	$92.33
Net Earnings Attributable to PNMR ($USD Millions)	N/A	N/A	$45.30
Operating Income Margin (%)	N/A	N/A	19.3% (calc. from $92.33/$477.16)
Net Income Margin (%)	N/A	N/A	9.5% (calc. from $45.30/$477.16)

Notes: Operating and net income margins in Q2 2023 are calculated from cited revenue and income figures.
YoY revenue: $477.16M vs $499.73M in Q2 2022 (−4.5%) . YoY GAAP EPS: $0.53 vs $0.18 (+$0.35), with improved trust gains vs prior-year losses .

Segment EPS Breakdown

Segment	GAAP Diluted EPS Q2 2022	GAAP Diluted EPS Q2 2023	Ongoing Diluted EPS Q2 2022	Ongoing Diluted EPS Q2 2023
PNM	($0.07)	$0.36	$0.32	$0.38
TNMP	$0.30	$0.29	$0.31	$0.29
Corporate & Other	($0.05)	($0.12)	($0.06)	($0.12)
Consolidated	$0.18	$0.53	$0.57	$0.55

Selected KPIs and Line Items (Q2 2023 vs Q2 2022)

KPI / Line Item	Q2 2022	Q2 2023
Cost of Energy ($USD Millions)	$195.60	$172.45
Depreciation & Amortization ($USD Millions)	$76.77	$79.14
Transmission & Distribution Costs ($USD Millions)	$21.16	$25.47
Interest Charges ($USD Millions)	$29.22	$45.90
Gains (Losses) on Investment Securities ($USD Millions)	($41.80)	$3.78
Dividends Declared per Common Share ($)	$0.3475	$0.3675

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Ongoing EPS Guidance (diluted)	FY 2023	$2.65–$2.75 (Q4 2022 release)	$2.65–$2.75 (affirmed in Q2)	Maintained
Dividend per Share	Quarterly	$0.3475 (Q2 2022)	$0.3675 (Q2 2023)	Raised
Capital Plan Update	FY 2023 outlook	N/A	Management to update capital plan post Texas legislation; July temps suggest “top half” of guidance, with reevaluation at Q3	Informational update expected

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2022 and Q1 2023)	Current Period (Q2 2023)	Trend
Texas grid reliability investment	Emphasis on resilience and record-level investments; visibility improving	“Constructive legislative session” supporting reliability/resilience and new system peaks	Strengthening
Load growth (PNM & TNMP)	Crypto load at TNMP; residential/commercial strength at PNM; EIM savings highlighted	Weather-normalized growth; milder temps reduce usage; PNM demand drives transmission margins	Mixed (growth vs weather)
Interest rate hedging	Incremental swaps added in Q1 to reduce variable exposure ($1B hedged through Sep-23; $600M into 2024)	Corporate losses up on higher variable-rate interest net of hedges	Ongoing mitigation
Regulatory/legal (merger appeal)	NM Supreme Court appeal pending; PRC outcomes critical	Appeal pending; oral arguments Sept. 15, 2023; no statutory deadline for Court response	Awaited
O&M and rate recovery	O&M increases noted; TNMP TCOS/DCRF filings continue	Rate recovery offset by milder temps and higher planned O&M; depreciation/property tax/interest from new capex weigh	Neutral/Headwind

Management Commentary

“New system peaks at both TNMP and PNM continue to demonstrate the need to invest in our infrastructure to ensure safe, reliable service to our customers at affordable rates” — Pat Vincent-Collawn .
“Rate recovery through TCOS and DCRF increases and weather-normalized load growth [at TNMP] was more than offset by depreciation, property tax and interest expense associated with new capital investments, milder temperatures and higher planned O&M expenses” .
Conference call update: “July temperatures indicate we will likely be in the top half of the guidance range this year and we will reevaluate our expectations based on Q3 results at our next earnings call” .

Q&A Highlights

Guidance cadence: Management indicated July temperature trends point to “top half” of FY23 guidance; capital plan update to incorporate Texas legislation and grid modernization timing shifts at next call .
Rate case/settlement dynamics: Discussion acknowledged complexity and focus on preparing the strongest case for September proceedings; openness to settlement but with no commitments expressed .
Interest rate exposure: Reinforced hedge strategy to mitigate variable-rate sensitivity; corporate interest expense still elevated YoY .

Estimates Context

Q2 2023 actual normalized EPS was $0.55 vs S&P Global consensus $0.56 (miss ~1.8%); revenue was $477.16M vs $446.75M consensus (beat ~~6.8%) **[https://www.txnmenergy.com/~~/media/Files/P/PNM-Resources/quarterly-results/2023/PNM%20Resources%20Inc_Earnings%20Call_2023-08-04.pdf]**.
GetEstimates (S&P Global) API was unavailable due to daily limit; consensus figures cited above are from S&P Global Market Intelligence within the transcript packet .

Key Takeaways for Investors

Revenue strength and improved trust gains drove YoY EPS expansion, but higher depreciation, property tax, interest, and planned O&M, plus milder temperatures, compressed earnings vs EPS consensus despite a revenue beat — favor ongoing rate recovery and capex visibility in Texas to support medium-term EPS .
Affirmed FY23 ongoing EPS guidance ($2.65–$2.75) with management suggesting “top half” potential based on July trends; watch Q3 update for capital plan changes and any guidance refinements .
Segment mix: PNM margin tailwinds from demand and lower generation costs; TNMP continuing rate recovery but weather/O&M costs a headwind; focus on filings and implementation timing for earnings trajectory .
Regulatory timeline remains an overhang; NM Supreme Court oral arguments scheduled Sept 15, 2023; outcome shapes merger path and potential financing structure; near-term investor narrative linked to regulatory clarity .
Interest rate risk mitigation continues via hedging; still elevates corporate interest expense — monitor fixed/variable mix and refinancing steps (e.g., holding company term loan extension to 2026) for cash flow predictability .
Dividend growth evident (Q2 declared $0.3675 vs $0.3475 YoY), aligning with regulated utility cash return profile amid infrastructure investment cycle .
Near-term trading: Potential positive skew on capital plan/legislative updates and rate implementation; caution on weather variability and interest expense; medium-term thesis anchored in regulated rate base growth and earnings stability .

Citations:
Primary Q2 2023 8-K and Exhibit 99.1 press release (financials, segment EPS, reconciliations): .
Q2 2023 earnings call transcript and S&P Global consensus data packet: .
Additional transcript references: .
Q1 2023 press release and transcript: .
Q1 2023 revenue: .
Q4 2022 press release and EPS references: .

TXNM ENERGY INC (TXNM)·Q2 2023 Earnings Summary