Calpine Realzies a Q4 Profit on Higher Than Expected Revenues

Calpine managed to swing a net income in Q4 because of increased operating revenues and unrealized gains on power hedges. Operating revenues for the quarter rose to $1.9 billion from last year's $1.4 billion, which came in slightly above consensus. Net Income attributable to shareholders was $210 million, or $0.54 per diluted share, compared to a net loss of $97 million, or $0.23 per diluted share, in the year ago period. Overall, 2014 was a rather successful year for Calpine as they reported adjusted EBITDA of $1.95 billion, adjusted FCF of $830 million, resulting in an adjusted FCF per share of $2.03. All three metrics hit record highs for Calpine even after the company effectively raised guidance twice during the year. Last week CPN successfully completed a $650 million nine-year unsecured debt offering of 5.5% used in part to payout some higher priced debt and in part fund growth. Also, Calpine continues to return money to its shareholders by completing $277 million of buybacks since the last quarterly call in November. CPN's stock price has been falling due to the recent fall in commodity pricing but instead of getting "stepped on", Calpine is taking advantage of decreasing commodity prices by vamping up their share repurchase program. Since the beginning of the program in 2011, CPN has show strong confidence in their own company by repurchasing approximately 25% of their outstanding shares for $2.4 billion. Calpine still continues to reap benefits in Q4 from the purchase of the Fore River Energy Center. As crude oil and natural gas prices continue to rise through 2015, this energy center's productivity has nowhere to go but up. Thad Hill says, "I hope it is evident from this report, we continue to execute operationally, commercially, financially, and strategically." For 2015 Calpine is targeting GAAP net income in the range of $295-$495 million. Adjusted EBITDA is estimated at $1.9-$2.1 billion and earnings are projected in a range of $2.10-$2.60 per share. During the earnings call last Friday Thad Hill, Calpine's President and CEO, reitterated these financial assumptions for the upcoming year, showcasing confidence in their ability to deliver value to the shareholders. He also reported that his company continues to make progress managing both their balance sheet as well as their portfolio. To conclude, I believe that Calpine is still a strong company with a lot of potential upside. Although their stock has not been performing as of late, the company posted solid results in the fourth quarter and reaffirmed guidance for 2015. Based on their guidance, this stock is undervalued at its current price. After reading what upper management said in the earnings transcript it is clear how much this company is devoted to keeping its promises. I beleive that Calpine will stay in line, if not beat guidance for 2015 which is why I still think CPN is a buy at this point.