Exchange: LSE | Sector: Utilities | Industry: General Utilities
Q3 2024
Published: Nov 1, 2024
Earnings Highlights
Revenue of $3.94B up 3.4% year-over-year
EPS of $1.12 increased by 558.8% from previous year
Gross margin of 52.6%
Net income of 954.00M
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Dominion Energy Inc (0IC9.L) QQ3 2024 Results — Solid Regulated Earnings Base with Strategic Capex Deployment in a High-Rate Environment
Executive Summary
Dominion Energy’s QQ3 2024 results reflect continued strength in the regulated utility franchise, supported by a sizable operating income base and robust margins. Revenue of USD 3.941 billion rose 3.4% year-over-year and 13.1% quarter-over-quarter, with gross margins near 60% and operating margins around 31%, driven by stable rate-regulated activities. Net income expanded to USD 954 million, up approximately 485% year-over-year and 67% sequentially, aided by favorable mix and higher operating leverage, though earnings benefited from a low base in the prior year period and non-operational items that warrant scrutiny.
However, the quarter also underscores the capital-intensive growth path: capital expenditures of USD 3.0 billion outpaced operating cash flow, yielding a negative free cash flow of USD -1.461 billion. Operating cash flow stood at USD 1.54 billion, underpinning liquidity, but the company’s leverage and capex cadence imply continued sensitivity to interest rates and regulatory timing. The dividend payout ratio sits around 58.6%, with a modest implied yield of ~1.16%, reflecting a balance between shareholder returns and funding growth assets.
Looking ahead, Dominion’s earnings trajectory appears to hinge on regulated rate base growth and timely recovery of invested capex through regulated mechanisms, with ongoing exposure to interest-rate fluctuations and regulatory outcomes. Management commentary (where available) typically reinforces a strategy of rate-base expansion and contracted-asset development to sustain earnings visibility, though the near-term cash flow profile may remain pressured by growth projects. Investors should monitor capex pacing, regulatory approvals, and debt management as headwinds and opportunities unfold.
Financial performance snapshot (USD, Q3 2024):
- Revenue: 3.941B (+3.44% YoY; +13.05% QoQ)
- Gross Profit: 2.073B (+11.81% YoY; +24.73% QoQ)
- EBITDA: 1.965B
- Operating Income: 1.219B (+17.68% YoY; +51.30% QoQ)
- Net Income: 0.954B (+485.28% YoY; +66.78% QoQ)
- EPS (diluted): 1.12
- Interest expense: N/A
- Free Cash Flow: (1.461B) due to capex deployment and working capital dynamics
- Cash from operating activities: 1.539B; Capital expenditures: (3.000B); Net cash used in investing activities: (1.035B)
- Cash at end of period: 1.902B; Cash from financing activities: +1.191B
- Total assets: 99.820B; Total liabilities: 72.289B; Total stockholders’ equity: 27.531B
- Net debt: 41.249B; Debt-to-capitalization: 0.177; Interest coverage: 3.10x
- Current ratio/Quick ratio: 0.738 / 0.579; Cash ratio: 0.176
- Dividend payout ratio: 0.586; Dividend yield: 1.16%; Price-to-book: 1.75; P/E: 12.65
- Operating profit margin: 31.0%; Gross margin: 60.6%; Net margin: 24.2%
- ROE: 3.47%; ROA: 0.96%; ROCE: 1.37%
Key observations:
- The underlying business remains cash-flow stable, anchored by regulated activities with robust margins, but the cash flow profile is being pressured by high capex and investments in contracted assets.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.94B
3.44%
13.05%
Gross Profit
2.07B
11.81%
24.73%
Operating Income
1.22B
17.68%
51.30%
Net Income
954.00M
485.28%
66.78%
EPS
1.12
558.82%
72.31%
Key Financial Ratios
currentRatio
0.74
grossProfitMargin
60.2%
operatingProfitMargin
31.8%
netProfitMargin
25%
returnOnAssets
0.96%
returnOnEquity
3.47%
debtEquityRatio
0.22
operatingCashFlowPerShare
$1.83
freeCashFlowPerShare
$-1.74
dividendPayoutRatio
58.6%
priceToBookRatio
1.75
priceEarningsRatio
12.65
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data provided in the supplied dataset. Consequently, there are no management quotes or thematic highlights to synthesize for QQ3 2024. Once transcripts are available, we will append management tone on rate-base growth, regulatory timing, and asset deployment.
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Forward Guidance
Outlook and interpretation: Utilities peers typically emphasize regulated rate base growth, predictable earnings, and regulated returns to offset higher financing costs in a higher-rate environment. For Dominion Energy, expect management to reiterate a strategy focused on –
- Regulated rate base expansion in Virginia and South Carolina with ongoing investments in contracted assets to diversify risk and improve earnings visibility.
- Near-term free cash flow pressure driven by capex intensity, with free cash flow (FCF) recovering as rate base returns ramp and as capital projects mature.
- Financing strategy balancing debt issuance with repayment and potential refinancings, sustaining liquidity through stable operating cash flow.
- Regulatory risk and timing of rate cases as key variables, with potential upside if approved returns exceed base assumptions.
Assessment: The guidance likely centers on steady regulated earnings growth supported by rate base investments. Achievability hinges on timely regulatory approvals and the ability to finance ongoing capex without compromising liquidity. Investors should monitor capex cadence, rate-case outcomes, interest rate trends, and M&A or asset-participation opportunities that could enhance contracted asset exposure.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0IC9.L Focus
52.60%
31.80%
3.47%
12.65%
0OAL.L
1.00%
-2.26%
1.02%
25.50%
0HEC.L
33.30%
25.90%
3.61%
14.23%
0HS2.L
85.80%
30.80%
5.22%
77.33%
KOS.L
37.70%
28.30%
3.76%
10.03%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Dominion Energy trades on a relatively modest multiple (P/B ~1.75; P/E ~12.65) for a utility with a long-duration earnings profile. The QQ3 2024 results underscore a company with strong regulated earnings, supported by solid margins, yet challenged by a capital-intensive growth path that depresses near-term free cash flow. The investment thesis rests on: (1) continued regulated rate-base expansion and contracted asset growth that should stabilize earnings in the medium term; (2) capacity to fund capex while maintaining liquidity and a prudent debt profile; and (3) the potential upside from regulatory decisions that enable higher allowed returns.
Risks center on higher financing costs, regulatory timing, and execution risk of large-scale asset programs. Relative to peers in the utilities sector, Dominion offers reasonable earnings visibility but requires close monitoring of capex drive and rate-case outcomes to confirm a constructive path for long-term value creation. Overall, the stock could be attractive to risk-tolerant investors seeking regulated utility exposure with growth optionality, despite near-term FCF headwinds.
Key Investment Factors
Growth Potential
Growth potential stems from regulated rate base expansion and contracted renewables projects, which should provide earnings visibility and reasonably predictable cash flows even in a higher-rate environment.
Profitability Risk
Key risks include sustained higher interest rates impacting WACC and debt servicing, regulatory delays or unfavorable rate decisions, increased capex leading to persistent negative FCF in the near term, and execution risk on large-scale contracted assets and LNG-related activities.
Financial Position
Financial position remains solid with total assets of USD 99.82B and total equity of USD 27.53B. Net debt of USD 41.25B and interest coverage of 3.10x indicate leverage remains manageable but sensitive to rate fluctuations. Liquidity is adequate with USD 1.78B in cash and equivalents and USD 1.54B from operating activities, though FCF is negative in QQ3 due to capex intensity.
SWOT Analysis
Strengths
Stable, regulated earnings base with high visibility and decent margins (gross margin ~60%, operating margin ~31%).
Diverse asset mix with Virginia, South Carolina regulated operations and a portfolio of contracted assets and renewables.
Solid liquidity and a resilient equity base; manageable debt levels with moderate leverage.
Positive operating cash flow generation relative to current year earnings.
Weaknesses
Near-term negative free cash flow due to heavy capex deployment (~USD 3.0B) and working capital dynamics.
Low current and quick ratios indicate liquidity headwinds in a ramp-up capex environment.
High dependency on regulated rate cases and regulatory outcomes which can introduce earnings volatility.
Opportunities
Continued rate-base growth in regulated segments could unlock higher allowed returns and stable earnings.
Expansion of contracted assets and renewable natural gas facilities may improve asset quality and diversify revenue streams.
Potential improvements in cash generation as projects move from construction to operation.
Threats
Rising interest rates and tighter capital markets could increase financing costs and delay capex plans.
Regulatory risk and potential rate-case adverse decisions could compress margins and earnings upside.
Regulatory lag and project execution risk in large-scale growth programs.