Power company Duke Energy reported a 27 percent increase in operating profit Friday, topping Wall Street estimates, as a heat wave drove up electricity usage.
Based on the results, Duke said it expected 2007 earnings to come in well ahead of its previous target.
For the quarter, "the biggest single driver was the weather," Chief Financial Officer David Hauser said in a telephone interview. "It was a very hot summer."
Duke's Carolinas and Midwest markets experienced record-setting temperatures in August and September, driving up electricity usage.
"Demand was there and we were able to hit it," Chief Executive James Rogers told Reuters, adding that the company produced record nuclear output in the quarter.
Excluding special items and discontinued operations, earnings rose to $611 million, or 48 cents per share, from $481 million, or 29 cents per share, a year earlier.
Analysts on average had expected profit of 39 cents per share, according to Reuters Estimates.
Net income fell to $607 million, or 48 cents per share, from $763 million, or 60 cents per share. Year-earlier results included natural gas operations that Duke Energy spun off as Spectra Energy at the beginning of the year.
Sales climbed 16 percent to $3.82 billion, said Duke, which serves about 4 million customers and has about 37,000 megawatts of electric generating capacity in the Midwest and the Carolinas. The company also has more than 4,000 megawatts of electric generation in Latin America.
On the fierce drought that has plagued the Southeast, Rogers said that even in the worst-case scenario, electricity supplies would be fine until March.
"We do not expect any brownout," Rogers said.
While Rogers did not expect a continuing drought to drive up costs significantly, he said it might cause Duke to change its blend of generation.
"It might force us to lean more on our coal units," Rogers said.
Water is used to cool fossil and nuclear power plants.
Duke said it now expected 2007 earnings well above its target of $1.15 per share. Analysts were expecting $1.19, according to Reuters Estimates.
Shares of Duke were up 35 cents, or 1.9 percent, at $19.17 in morning New York Stock Exchange trade.
At Thursday's close, Duke shares had fallen about 5.5 percent since the beginning of the year, while the Standard and Poor's utility index had gained 13 percent.
The index has pulled back from a life-time high in May, hurt by the credit market turmoil since these stocks are often viewed as bond surrogates because of their high dividends.