Calpine Suffers Shaky Start to New Year

Calpine CPN has blown another fuse.

Unlike others in the sector -- notably CMS CMS and TXU TXU -- Calpine failed to meet Wall Street expectations on Thursday. Instead, the giant power provider zapped investors with news of a surprisingly dark first quarter due to difficult market conditions. Williams WMB disappointed as well.

Still, Calpine -- which fell well shy of both revenue and profit estimates -- delivered the biggest miss.

"It's not a good thing to have ugly-looking earnings," conceded Williams Capital analyst Chris Ellinghaus, a Calpine bull who owns the stock himself. "It's hard to say this is a good quarter by any stretch of the imagination."

Ellinghaus seriously doubts that Calpine can now meet the full-year break-even guidance that it, nevertheless, reiterated on Thursday. To be sure, the company is off to a shaky start.

During the first quarter, Calpine's revenue slid 6% to $2.04 billion instead of showing the expansion analysts had expected. The company's quarterly loss jumped 37% to $71.2 million, or 17 cents a share. On an operational basis, the company posted a 20-cent loss that was nearly twice the consensus estimate.

Warm weather and higher costs cut into Calpine's margins. The company continues to wait for an elusive power market recovery that can bring back its profitability.

"Calpine is trapped in an unusual nightmare where their costs are going up and the demand for their product is not," said Jon Cartwright, director of institutional research at BOSC. "A lot of what has happened to Calpine in the post-Enron environment has been completely out of their control."

Namely, fuel prices -- particularly the natural gas that powers the company's plants -- have soared. And power demand has, so far, failed to materially improve along with the economy.

Even so, Calpine continues to remain upbeat.