Dominion Energy, Inc. (D) Bundle
Understanding Dominion Energy, Inc. (D) Revenue Streams
Understanding Dominion Energy, Inc.’s Revenue Streams
The revenue streams of Dominion Energy, Inc. are primarily derived from utility operations, including electric and gas distribution, renewable energy, and other related services. Below is a detailed breakdown of the company's revenue sources, year-over-year growth, and segment contributions.
Breakdown of Primary Revenue Sources
- Electric Utility Revenue: $9,929 million for the nine months ended September 30, 2024, compared to $9,453 million in the same period of 2023.
- Gas Utility Revenue: $1,130 million for the nine months ended September 30, 2024, compared to $1,206 million in the same period of 2023.
- Renewable Energy Revenue: $845 million for the nine months ended September 30, 2024, compared to $1,200 million in the same period of 2023.
- Other Services Revenue: $155 million for the nine months ended September 30, 2024, compared to $160 million in the same period of 2023.
Year-over-Year Revenue Growth Rate
The company has experienced a 7% increase in operating revenue year-over-year, with the following growth rates across segments:
| Segment | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Year-over-Year Growth Rate |
|---|---|---|---|
| Electric Utility | $9,929 | $9,453 | 5% |
| Gas Utility | $1,130 | $1,206 | -6% |
| Renewable Energy | $845 | $1,200 | -29% |
| Other Services | $155 | $160 | -3% |
Contribution of Different Business Segments to Overall Revenue
The contribution of various segments to overall revenue for the nine months ended September 30, 2024, is as follows:
| Segment | Revenue Contribution (in millions) | Percentage of Total Revenue |
|---|---|---|
| Electric Utility | $9,929 | 89.9% |
| Gas Utility | $1,130 | 10.1% |
| Renewable Energy | $845 | 7.6% |
| Other Services | $155 | 1.4% |
Analysis of Any Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- A $557 million increase in sales associated with non-fuel riders.
- A $108 million increase in electric utility retail customer sales due to increased cooling degree days.
- A $184 million decrease in revenue due to the combination of certain riders into base rates as a result of 2023 Virginia legislation.
- A $135 million net decrease in fuel-related revenue attributed to lower commodity costs.
The total operating revenue for the third quarter of 2024 was $3,941 million, compared to $3,810 million for the third quarter of 2023, reflecting a 3% increase year-over-year.
A Deep Dive into Dominion Energy, Inc. (D) Profitability
A Deep Dive into Dominion Energy's Profitability
Gross Profit Margin: For the third quarter of 2024, gross profit was reported at $1,218 million with total operating revenue of $3,941 million, resulting in a gross profit margin of 30.9%. In comparison, the gross profit margin for the same quarter in 2023 was 27.0%, indicating an improvement.
Operating Profit Margin: The operating profit for Q3 2024 was $1,218 million, leading to an operating margin of 30.9% against total operating revenue. This is an increase from an operating margin of 27.0% in Q3 2023.
Net Profit Margin: The net income attributable to the company for Q3 2024 was $954 million, resulting in a net profit margin of 24.2%. This is significantly higher than a net profit margin of 4.1% in Q3 2023.
Trends in Profitability Over Time
The profitability metrics have shown a consistent upward trend over the past year:
- Gross Profit Margin: Increased from 27.0% in Q3 2023 to 30.9% in Q3 2024.
- Operating Profit Margin: Improved from 27.0% in Q3 2023 to 30.9% in Q3 2024.
- Net Profit Margin: Rose from 4.1% in Q3 2023 to 24.2% in Q3 2024.
Comparison of Profitability Ratios with Industry Averages
When comparing these profitability ratios with industry averages:
- Gross Profit Margin: Industry average stands at 28.0%, indicating that the company is performing above the average.
- Operating Profit Margin: The industry average is 25.0%, showing superior performance.
- Net Profit Margin: The industry average is 5.0%, highlighting a significant outperformance.
Analysis of Operational Efficiency
The operational efficiency metrics reflect effective cost management:
- Cost Management: Total operating expenses for Q3 2024 were $2,723 million, a decrease from $2,781 million in Q3 2023.
- Gross Margin Trends: The gross margin has improved due to a reduction in electric fuel and energy-related purchases, which decreased from $1,049 million in Q3 2023 to $910 million in Q3 2024.
| Metric | Q3 2024 | Q3 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 30.9% | 27.0% | 28.0% |
| Operating Profit Margin | 30.9% | 27.0% | 25.0% |
| Net Profit Margin | 24.2% | 4.1% | 5.0% |
| Total Operating Expenses (millions) | $2,723 | $2,781 | - |
| Electric Fuel and Energy-related Purchases (millions) | $910 | $1,049 | - |
Debt vs. Equity: How Dominion Energy, Inc. (D) Finances Its Growth
Debt vs. Equity: How Dominion Energy Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Dominion Energy reported total debt of $27.5 billion, consisting of both long-term and short-term debt. The breakdown includes:
- Long-term debt: $25.2 billion
- Short-term debt: $2.3 billion
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at 1.38, indicating a higher reliance on debt compared to equity. This is above the industry average of approximately 1.0, suggesting that Dominion Energy is more leveraged than many of its peers in the utility sector.
Recent Debt Issuances
In May 2024, Dominion Energy issued $2.0 billion in enhanced junior subordinated notes, with maturities extending to 2054. The interest rates for these notes are:
- Series A: 6.875% until February 2030, after which it will reset based on the five-year U.S. Treasury rate plus a spread.
- Series B: 7.0% until June 2034, similarly resetting thereafter.
Credit Ratings
As of September 30, 2024, Dominion Energy holds a credit rating of Baa2 from Moody's and BBB from Standard & Poor's. In June 2024, S&P revised the credit outlook from negative to stable, reflecting improved financial stability.
Refinancing Activity
In March 2024, Dominion Energy repaid $1.8 billion of its $2.25 billion 364-day term loan facility, utilizing proceeds from the East Ohio Transaction. Additionally, the company has maintained a $6.0 billion joint revolving credit facility, with $2.4 billion of unused capacity as of September 30, 2024.
Debt vs. Equity Funding Balance
Dominion Energy balances its financing strategy through a mix of debt and equity. In 2024, the company reported net income of $954 million, allowing it to continue funding capital projects while managing debt levels effectively. The company’s capital expenditures for 2024 are projected at $5.1 billion, primarily funded through cash flows from operations and new debt issuances.
| Type | Amount (in billions) |
|---|---|
| Total Debt | $27.5 |
| Long-term Debt | $25.2 |
| Short-term Debt | $2.3 |
| Debt-to-Equity Ratio | 1.38 |
| 2024 Capital Expenditures | $5.1 |
| Net Income (2024) | $0.954 |
Assessing Dominion Energy, Inc. (D) Liquidity
Assessing Dominion Energy's Liquidity
Current and Quick Ratios
The current ratio for Dominion Energy as of September 30, 2024, is 1.57, indicating a healthy liquidity position. The quick ratio, which excludes inventory from current assets, stands at 0.93, suggesting that while the company has sufficient current assets to cover its current liabilities, its immediate liquidity may be slightly constrained by inventory levels.
Analysis of Working Capital Trends
As of September 30, 2024, Dominion Energy reported working capital of $3.44 billion, a decrease from $3.62 billion in the previous quarter. This decline in working capital can be attributed to increased current liabilities, which rose to $7.22 billion compared to $6.94 billion in June 2024. The current assets remained stable at approximately $10.66 billion.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) | Current Ratio | Quick Ratio |
|---|---|---|---|---|---|
| September 30, 2024 | 10,660 | 7,220 | 3,440 | 1.57 | 0.93 |
| June 30, 2024 | 10,650 | 6,940 | 3,620 | 1.53 | 0.91 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, Dominion Energy reported the following cash flow activities:
- Operating Cash Flow: $4.38 billion, a decrease from $5.19 billion in 2023.
- Investing Cash Flow: $293 million, a significant improvement from $(4.09 billion) in 2023.
- Financing Cash Flow: $(3.07 billion), compared to $(1.19 billion) in the previous year.
The decrease in operating cash flow reflects lower fuel and purchased gas cost recoveries and increased interest payments due to higher borrowing costs. In contrast, the positive cash flow from investing activities was mainly driven by net proceeds from the sale of certain assets.
Potential Liquidity Concerns or Strengths
Dominion Energy maintains a $6.0 billion joint revolving credit facility, with $2.4 billion of unused capacity as of September 30, 2024. This facility provides a buffer against potential liquidity risks. However, the company's reliance on short-term borrowings, including commercial paper, may pose risks if market conditions change unfavorably.
In terms of cash reserves, Dominion Energy reported $1.90 billion in cash and cash equivalents as of September 30, 2024, a substantial increase from $247 million at the same point in 2023. This improvement enhances the company's liquidity position and provides a cushion for unexpected cash flow needs.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | 4,377 | 5,186 |
| Investing Activities | 293 | (4,091) |
| Financing Activities | (3,069) | (1,189) |
| Net Cash Increase | 1,601 | (94) |
| Cash at Period End | 1,902 | 247 |
Is Dominion Energy, Inc. (D) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will look at key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 21.5, which reflects the company's earnings relative to its stock price. This indicates that investors are willing to pay $21.50 for every dollar of earnings.
Price-to-Book (P/B) Ratio
The current P/B ratio stands at 1.8, suggesting that the stock is trading at 1.8 times its book value. This can indicate the market's expectations for future growth relative to the company's current net asset value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 12.3, which illustrates the company's valuation compared to its earnings before interest, taxes, depreciation, and amortization. A lower ratio may indicate undervaluation.
Stock Price Trends
Over the last 12 months, the stock price has seen a fluctuation from a low of $60.00 to a high of $72.00. Currently, the stock is trading at $69.00, reflecting an increase of 15% year-to-date.
Dividend Yield and Payout Ratio
The dividend yield is currently at 4.2%, which is calculated based on an annual dividend of $2.88 per share. The payout ratio is 65%, indicating that 65% of earnings are distributed as dividends, which can suggest a sustainable dividend policy while still allowing for growth investments.
Analyst Consensus
The current analyst consensus rating is a Hold, with a price target of $71.00, indicating a potential upside of approximately 3% from the current trading price.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 21.5 |
| P/B Ratio | 1.8 |
| EV/EBITDA Ratio | 12.3 |
| 12-Month Low Price | $60.00 |
| 12-Month High Price | $72.00 |
| Current Stock Price | $69.00 |
| Dividend Yield | 4.2% |
| Dividend Payout Ratio | 65% |
| Analyst Consensus | Hold |
| Price Target | $71.00 |
Key Risks Facing Dominion Energy, Inc. (D)
Key Risks Facing Dominion Energy, Inc.
The financial health of Dominion Energy, Inc. is shaped by a myriad of risk factors that can impact its operations and profitability. Below is a detailed breakdown of the internal and external risks affecting the company.
Industry Competition
Dominion Energy operates in a highly competitive utility industry, facing pressure from both traditional utility providers and emerging renewable energy companies. The competition for customers and market share can affect pricing strategies and profit margins.
Regulatory Changes
As a regulated utility, Dominion Energy is subject to numerous federal, state, and local regulations. Changes in regulations, particularly those related to environmental standards and energy pricing, can significantly impact operations and financial performance. For instance, compliance costs can increase with new environmental regulations, which may affect cash flows.
Market Conditions
The company is exposed to fluctuations in market conditions, including changes in energy prices and demand. For example, a decrease in demand due to economic downturns or increased energy efficiency measures can negatively impact revenue. Additionally, the volatility of commodity prices can affect operating costs.
Operational Risks
Operational risks include potential outages, equipment failures, and maintenance issues that can disrupt service delivery. In 2024, unplanned outages at Millstone resulted in a revenue decrease of $16 million. Such operational disruptions can also lead to increased costs and regulatory scrutiny.
Financial Risks
Dominion Energy faces financial risks associated with its capital structure and debt levels. As of September 30, 2024, the company had $2.4 billion in unused capacity under its $6.0 billion joint revolving credit facility. The reliance on external financing can lead to increased interest costs, especially in a rising interest rate environment. A 10% increase in market interest rates could lead to an estimated decrease in earnings of $22 million.
Strategic Risks
Strategic risks arise from decisions related to mergers, acquisitions, and expansions. The recent sale of noncontrolling interests in Cove Point and other transactions highlights the need for careful strategic planning. The absence of gains from these sales can impact overall profitability, as seen with a $348 million loss in equity method earnings.
Mitigation Strategies
To mitigate these risks, Dominion Energy employs several strategies, including:
- Investment in Technology: Enhancing operational efficiency through technological upgrades to minimize outages and maintenance costs.
- Diverse Energy Portfolio: Expanding into renewable energy sources to reduce dependence on traditional fossil fuels and improve regulatory compliance.
- Financial Management: Maintaining a balanced capital structure and utilizing hedging strategies to manage interest rate and commodity price risks.
Summary of Key Financial Metrics and Risk Factors
| Risk Factor | Impact on Financials | Mitigation Strategy |
|---|---|---|
| Industry Competition | Pressure on pricing and margins | Diverse energy portfolio |
| Regulatory Changes | Increased compliance costs | Investment in cleaner technologies |
| Market Conditions | Fluctuations in revenue | Hedging strategies |
| Operational Risks | Increased costs from outages | Technological upgrades |
| Financial Risks | Increased interest expense | Balanced capital structure |
| Strategic Risks | Impact on profitability | Careful strategic planning |
Future Growth Prospects for Dominion Energy, Inc. (D)
Growth Opportunities
Future growth prospects for Dominion Energy are supported by several key growth drivers. These include product innovations, market expansions, and strategic acquisitions that are poised to enhance the company's revenue streams.
Key Growth Drivers
- Product Innovations: The company is focusing on renewable energy solutions and enhancing its electric distribution systems. In 2024, the company plans to invest approximately $2.5 billion in renewable energy projects, including solar and wind initiatives.
- Market Expansions: Dominion Energy is expanding its service areas, particularly in Virginia and North Carolina, which are projected to see a combined 5% annual growth in energy demand through 2025.
- Strategic Acquisitions: The acquisition of Questar Gas and other regional assets is expected to add $300 million in annual revenue starting in 2025.
Future Revenue Growth Projections
The company's revenue is projected to grow significantly over the next few years. For 2024, analysts forecast total operating revenue to reach approximately $12 billion, up from $11.1 billion in 2023. This growth is largely attributed to increased investments in infrastructure and renewable energy.
| Year | Projected Revenue (in billions) | Growth Rate |
|---|---|---|
| 2023 | $11.1 | - |
| 2024 | $12.0 | 8.1% |
| 2025 | $13.0 | 8.3% |
Earnings Estimates
In terms of earnings, analysts estimate that the earnings per share (EPS) for 2024 will increase to $2.70, compared to $2.55 in 2023. This reflects an estimated growth rate of 5.9% year-over-year.
Strategic Initiatives and Partnerships
- Partnerships: The company has entered into a partnership with Stonepeak to co-develop renewable projects, which is anticipated to enhance its renewable energy capacity by 3 GW by 2026.
- Regulatory Support: Dominion Energy is actively pursuing regulatory approvals for new projects that could provide favorable returns on investments, including a $1.5 billion investment in grid modernization.
Competitive Advantages
Dominion Energy holds several competitive advantages that position it favorably for future growth:
- Established Infrastructure: The company has a robust infrastructure with over 91,000 miles of transmission and distribution lines.
- Regulatory Relationships: Strong relationships with regulatory bodies facilitate smoother project approvals and favorable rate structures.
- Diverse Energy Portfolio: A mix of renewable and traditional energy sources allows for flexibility in meeting customer demands and regulatory requirements.
Overall, the growth outlook for Dominion Energy is positive, with sustained investments and strategic initiatives aimed at enhancing its market position and financial performance.
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Article updated on 8 Nov 2024
Resources:
- Dominion Energy, Inc. (D) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Dominion Energy, Inc. (D)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Dominion Energy, Inc. (D)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.