Dynegy Narrows Loss Estimates

Dynegy narrows its net loss forecast for the year after reporting a swing to profit in the first quarter.
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(Dynegy article updated with analyst comment and stock price movement.)
HOUSTON (TheStreet) -- Dynegy (DYN) narrowed its net loss forecast for the year after reporting a swing to profit in the first quarter and on the view that the emerging economic recovery is a precursor to demand growth and potentially more favorable power pricing in the future.

Still, "we continue to believe that DYN does not deserve a premium multiple, as its portfolio has an average proportion of gas-fired capacity thus reducing the volumetric upside potential following the sale of gas assets to LS Power," Macquarie Capital analyst Angie Storozynski said in a research note. "While retirements of some coal plants in Illinois could boost heat rates in the state, it should take until 2015, and growing wind power capacity in the Midwest could offset the potential impact."

Dynegy said it expects a full-year loss of $135 million to $60 million, compared with the previous forecast for a net loss of $215 million to $140 million. The company reported first-quarter net income of $145 million, or 24 cents a share -- which included mark-to-market gains of $253 million -- compared with a net loss of $335 million, or 40 cents a share, a year ago.

Revenue was $858 million compared with $904 million the previous year. Overall, analysts were expecting a loss of 10 cents a share on revenue of $584.37 million.

Storozynski noted the importance of realizing that Dynegy's better-than-expected first-quarter earnings "was largely attributed to cUS$30m in net benefits from monetization of natural gas hedges in the West and the Northeast, which we see as one-off gains."

Dynegy was jumping 12.6% to $1.34 amid the overall stock market rally.

-- Reported by Andrea Tse in New York

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