My Market Wizard

PUBLIC SERVICE CO OF NEW MEXICO 8-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Public Service Company of New M
,

Filing date:

02/21/2025

TLDR:

TXNM Energy reported 2024 earnings, increased its investment plan, and raised its long-term earnings growth targets.

ELI5:

TXNM Energy made more money in 2024 than in 2023 and expects to keep growing. They’re investing a lot more money in their business, especially in Texas, to make sure they can keep providing energy to people.

Accession #:

0001108426-25-000006

Published on

Analyst Summary

  • 2024 GAAP Earnings Per Share (EPS): $2.67
  • 2024 Ongoing Earnings Per Share (EPS): $2.74
  • 2025 Ongoing Earnings Guidance: $2.74 – $2.84 per diluted share
  • 5-Year Capital Investment Plan: Increased to $7.8 billion (2025-2029)
  • Targeted Regulated Rate Base Growth: 12% growth under the plan compared to 2025 levels
  • Gross Profit Margin increased from 58.63% in 2023 to 70.37% in 2024.
  • Operating Profit Margin increased from 11.93% in 2023 to 23.01% in 2024.
  • Net Profit Margin increased from 5.51% in 2023 to 13.13% in 2024.
  • Basic and Diluted EPS increased from $1.02 in 2023 to $2.67 in 2024.
  • Interest Coverage Ratio increased from 0.48 in 2023 to 1.23 in 2024.
  • P/E Ratio decreased from 72.55 in 2023 to 27.72 in 2024.
  • Revenue grew by 1.65% from 2023 to 2024.
  • Net income grew by 142.07% from 2023 to 2024.
  • EPS grew by 161.76% from 2023 to 2024.

Opportunities and Risks

  • Texas Growth: The strong growth in the Texas service territory (TNMP) is a significant driver of future earnings.
  • Rate Adjustments: The phased-in rate increase in New Mexico (PNM) will contribute to revenue growth.
  • Infrastructure Investment: The increased capital investment plan positions the company to benefit from grid modernization and increased demand.
  • Regulatory Risk: The utility sector is heavily regulated, and adverse regulatory decisions can significantly impact earnings.
  • Execution Risk: The ambitious capital investment plan requires effective project management and cost control.
  • Interest Rate Risk: Higher interest rates on variable rate debt could negatively impact earnings, as noted in the Corporate and Other segment.
  • Economic Conditions: Milder summer temperatures impacted earnings, highlighting sensitivity to weather patterns and economic activity.

Potential Implications

Company Performance

  • Increased capital investment plan positions the company to benefit from grid modernization and increased demand.
  • Strong growth in the Texas service territory (TNMP) is a significant driver of future earnings.
  • Phased-in rate increase in New Mexico (PNM) will contribute to revenue growth.

Stock Price

  • The company’s growth prospects are promising, but the risks warrant a cautious approach.
  • TXNM Energy’s P/E ratio is higher than the industry average, suggesting that the stock may be overvalued or that investors expect high future growth.

TXNM Energy Inc. (TXNM) – 8-K Filing Report – February 21, 2025

Executive Summary

This 8-K filing from TXNM Energy Inc. (TXNM) announces the company’s 2024 earnings results, provides 2025 earnings guidance, and updates its long-term growth outlook. The company reported GAAP earnings of $2.67 per diluted share and ongoing earnings of $2.74 per diluted share for 2024, achieving its guidance expectations. 2025 ongoing earnings guidance is set at $2.74 – $2.84 per diluted share. The long-term earnings per share growth target has been increased to 7% to 9%. A significant increase in the 5-year capital investment plan to $7.8 billion, driven by Texas transmission projects, is a key factor in the improved outlook. Overall, the filing presents a positive outlook for TXNM, driven by growth in Texas and rate adjustments in New Mexico.

Company Overview

TXNM Energy (NYSE: TXNM) is an energy holding company based in Albuquerque, New Mexico, delivering energy to over 800,000 customers in Texas and New Mexico through its regulated utilities, TNMP and PNM. TNMP operates in Texas, while PNM operates in New Mexico.

Detailed Analysis

Management’s Narrative (MD&A)

Management’s tone is optimistic, emphasizing growth opportunities and strategic investments. The CEO highlights the expansion of grid infrastructure in Texas and the phased-in rate review in New Mexico. The narrative focuses on reliability, resilience, and direct customer benefits. The forward-looking statements regarding earnings growth and capital investment are prominent.

Financial Statement Analysis

Key Highlights from the Press Release:
  • GAAP Earnings Per Share (EPS): 2024: $2.67, 2023: $1.02
  • Ongoing Earnings Per Share (EPS): 2024: $2.74, 2023: $2.82
  • 2025 Ongoing Earnings Guidance: $2.74 – $2.84 per diluted share
  • 5-Year Capital Investment Plan: Increased to $7.8 billion (2025-2029)
  • Regulated Rate Base Growth: Targeted 12% growth under the plan compared to 2025 levels
Segment Performance:
Segment GAAP Diluted EPS 2024 GAAP Diluted EPS 2023 Ongoing Diluted EPS 2024 Ongoing Diluted EPS 2023
PNM $2.12 $0.41 $2.16 $2.22
TNMP $1.14 $1.10 $1.15 $1.11
Corporate and Other ($0.59) ($0.49) ($0.57) ($0.51)
Consolidated TXNM Energy $2.67 $1.02 $2.74 $2.82

Analysis: TNMP shows consistent growth, while PNM’s GAAP EPS significantly improved due to regulatory disallowances in 2023. Corporate and Other continues to be a drag on overall earnings.

Reconciliation of GAAP to Ongoing Earnings:

The company uses “ongoing earnings” as a non-GAAP measure, excluding items like unrealized gains/losses on investment securities, regulatory disallowances, pension expenses related to disposed businesses, and merger-related costs. This provides a clearer picture of core operational performance.

Red Flags and Uncommon Metrics

  • Non-GAAP Measures: The heavy reliance on “ongoing earnings” requires careful scrutiny. While management argues it provides a better view of core operations, investors should understand the excluded items and their potential impact.
  • Regulatory Disallowances: The significant impact of regulatory disallowances on PNM’s earnings highlights the regulatory risk inherent in the utility sector.
  • Increased Capital Investment: The 26% increase in the 5-year capital investment plan is substantial. While it’s presented as a growth driver, it also increases financial risk and requires successful execution.

Risk and Opportunity Assessment

Opportunities:
  • Texas Growth: The strong growth in the Texas service territory (TNMP) is a significant driver of future earnings.
  • Rate Adjustments: The phased-in rate increase in New Mexico (PNM) will contribute to revenue growth.
  • Infrastructure Investment: The increased capital investment plan positions the company to benefit from grid modernization and increased demand.
Risks:
  • Regulatory Risk: The utility sector is heavily regulated, and adverse regulatory decisions can significantly impact earnings.
  • Execution Risk: The ambitious capital investment plan requires effective project management and cost control.
  • Interest Rate Risk: Higher interest rates on variable rate debt could negatively impact earnings, as noted in the Corporate and Other segment.
  • Economic Conditions: Milder summer temperatures impacted earnings, highlighting sensitivity to weather patterns and economic activity.

Conclusion and Actionable Insights

TXNM Energy presents a generally positive outlook, driven by growth in Texas and strategic investments. The increased long-term earnings growth target and substantial capital investment plan signal confidence in the company’s future. However, investors should carefully consider the regulatory and execution risks, as well as the reliance on non-GAAP measures.

Overall Assessment: Hold. The company’s growth prospects are promising, but the risks warrant a cautious approach.

Recommendations:

  • Monitor Regulatory Developments: Closely track regulatory decisions in both Texas and New Mexico.
  • Assess Capital Investment Execution: Evaluate the company’s progress in executing its capital investment plan and managing costs.
  • Analyze Non-GAAP Reconciliations: Understand the impact of excluded items on “ongoing earnings” and compare them to GAAP results.
  • Evaluate Debt Levels: Monitor the company’s debt levels and interest rate exposure.

TXNM Energy, Inc. Financial Analysis (February 21, 2025)

This report analyzes the financial performance of TXNM Energy, Inc. based on their 8-K filing from February 21, 2025. The analysis includes key financial ratios and metrics, comparing the current period (2024) to the previous year (2023) and providing industry context where possible. The stock price at the time of reporting was $74.00.

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: ($1,971,199 – $583,984) / $1,971,199 = 70.37% (2024); ($1,939,198 – $802,261) / $1,939,198 = 58.63% (2023)
    • Trend: Increased from 58.63% in 2023 to 70.37% in 2024, a 19.9% increase.
    • Industry: The average gross profit margin for the utilities sector typically ranges from 30% to 50%. TXNM Energy’s gross profit margin is significantly higher than the industry average, indicating strong cost management or pricing strategies.
  • Operating Profit Margin:

    • Calculation: $453,486 / $1,971,199 = 23.01% (2024); $231,340 / $1,939,198 = 11.93% (2023)
    • Trend: Increased from 11.93% in 2023 to 23.01% in 2024, a 92.9% increase.
    • Industry: A good operating margin for utilities is generally between 10% and 20%. TXNM Energy’s 2024 operating margin is above this range, suggesting efficient operations.
  • Net Profit Margin:

    • Calculation: $258,722 / $1,971,199 = 13.13% (2024); $106,879 / $1,939,198 = 5.51% (2023)
    • Trend: Increased from 5.51% in 2023 to 13.13% in 2024, a 138.3% increase.
    • Industry: The average net profit margin for the utilities sector is around 5% to 10%. TXNM Energy’s net profit margin is above the industry average, indicating strong profitability.
  • Return on Assets (ROA):

    • Calculation: ROA requires total assets, which are not provided in this filing.
    • Trend: Cannot be determined without prior period ROA.
    • Industry: Cannot be determined without calculation.
  • Return on Equity (ROE):

    • Calculation: ROE requires total equity, which is not provided in this filing.
    • Trend: Cannot be determined without prior period ROE.
    • Industry: Cannot be determined without calculation.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: Basic EPS = Diluted EPS = $2.67 (2024); Basic EPS = Diluted EPS = $1.02 (2023)
    • Trend: Increased from $1.02 in 2023 to $2.67 in 2024, a 161.8% increase.
    • Industry: EPS varies widely within the utilities industry. A positive trend is generally favorable.

Liquidity

  • Current Ratio:

    • Calculation: Requires current assets and current liabilities, which are not provided in this filing.
    • Trend: Cannot be determined without prior period Current Ratio.
    • Industry: Cannot be determined without calculation.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: Requires quick assets and current liabilities, which are not provided in this filing.
    • Trend: Cannot be determined without prior period Quick Ratio.
    • Industry: Cannot be determined without calculation.
  • Cash Ratio:

    • Calculation: Requires cash and cash equivalents and current liabilities, which are not provided in this filing.
    • Trend: Cannot be determined without prior period Cash Ratio.
    • Industry: Cannot be determined without calculation.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Requires total debt and total equity, which are not provided in this filing.
    • Trend: Cannot be determined without prior period Debt-to-Equity Ratio.
    • Industry: Cannot be determined without calculation.
  • Debt-to-Assets Ratio:

    • Calculation: Requires total debt and total assets, which are not provided in this filing.
    • Trend: Cannot be determined without prior period Debt-to-Assets Ratio.
    • Industry: Cannot be determined without calculation.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: $280,240 / $228,066 = 1.23 (2024); $90,529 / $190,355 = 0.48 (2023)
    • Trend: Increased from 0.48 in 2023 to 1.23 in 2024, a 156.3% increase.
    • Industry: A ratio above 1.5 is generally considered safe. TXNM Energy’s interest coverage ratio is below this threshold, indicating potential concerns about its ability to meet interest obligations.

Activity/Efficiency

  • Inventory Turnover:

    • Not applicable as the necessary data is not provided in the filing.
  • Days Sales Outstanding (DSO):

    • Calculation: Requires accounts receivable and revenue, which are not provided in this filing.
    • Trend: Cannot be determined without prior period DSO.
    • Industry: Cannot be determined without calculation.
  • Days Payable Outstanding (DPO):

    • Calculation: Requires accounts payable and cost of revenue, which are not provided in this filing.
    • Trend: Cannot be determined without prior period DPO.
    • Industry: Cannot be determined without calculation.
  • Asset Turnover:

    • Calculation: Requires total assets and revenue, which are not provided in this filing.
    • Trend: Cannot be determined without prior period Asset Turnover.
    • Industry: Cannot be determined without calculation.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: $74.00 / $2.67 = 27.72 (2024); $74.00 / $1.02 = 72.55 (2023)
    • Trend: Decreased from 72.55 in 2023 to 27.72 in 2024, a 61.8% decrease.
    • Industry: The average P/E ratio for the utilities sector is around 15-20. TXNM Energy’s P/E ratio is higher than the industry average, suggesting that the stock may be overvalued or that investors expect high future growth.
  • Price-to-Book Ratio (P/B):

    • Calculation: Requires book value per share, which is not provided in this filing.
    • Trend: Cannot be determined without prior period P/B Ratio.
    • Industry: Cannot be determined without calculation.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Requires market capitalization and total revenue, which are not fully provided in this filing.
    • Trend: Cannot be determined without prior period P/S Ratio.
    • Industry: Cannot be determined without calculation.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: Requires market capitalization, debt, cash, and EBITDA, which are not fully provided in this filing.
    • Trend: Cannot be determined without prior period EV/EBITDA.
    • Industry: Cannot be determined without calculation.

Growth Rates

  • Revenue Growth:

    • Calculation: ($1,971,199 – $1,939,198) / $1,939,198 = 1.65%
    • Trend: Revenue grew by 1.65% from 2023 to 2024.
    • Industry: The revenue growth for utilities is typically slow and steady, often in the low single digits.
  • Net Income Growth:

    • Calculation: ($258,722 – $106,879) / $106,879 = 142.07%
    • Trend: Net income grew by 142.07% from 2023 to 2024.
    • Industry: This is a significant increase, suggesting substantial improvements in profitability.
  • EPS Growth:

    • Calculation: ($2.67 – $1.02) / $1.02 = 161.76%
    • Trend: EPS grew by 161.76% from 2023 to 2024.
    • Industry: This substantial growth in EPS aligns with the net income growth and indicates improved earnings per share for investors.

Other Relevant Metrics

  • Ongoing Net Earnings:

    • Definition: A non-GAAP metric that excludes certain adjusting items to provide a clearer picture of the company’s core operational performance.
    • Calculation: $247.8 million (2024); $243.5 million (2023)
    • Trend: Increased slightly from $243.5 million in 2023 to $247.8 million in 2024, a 1.8% increase.
    • Significance: This metric shows a more stable earnings picture compared to GAAP net earnings, suggesting that the adjusting items had a significant impact on the reported GAAP results. The adjustments seem reasonable as they relate to non-recurring items like merger-related costs and unrealized gains/losses on investments.
  • Adjusting Items:

    • The company identifies several adjusting items, including net changes in unrealized gains/losses on investment securities, regulatory disallowances, FERC refunds, pension expenses, process improvement initiatives, merger-related costs, and the sale of NMRD. These items are excluded from ongoing earnings to provide a clearer view of operational performance.
    • The income tax impacts of these adjustments are also separately identified.

2. Commentary

TXNM Energy’s financial performance improved significantly in 2024 compared to 2023, with substantial increases in gross profit margin, operating profit margin, net profit margin, and EPS. The company’s profitability metrics are generally above the industry average, indicating strong performance. However, the interest coverage ratio is relatively low, suggesting potential concerns about debt management. While GAAP earnings show significant growth, ongoing earnings provide a more stable view of the company’s core operational performance, with a modest increase year-over-year.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️