Investment Thesis
Entergy demonstrates solid operational performance with 9% revenue growth and 18% operating margins, but faces significant financial distress risks from critically low interest coverage (1.4x), high leverage (1.88x D/E), and persistent negative free cash flow. The company's capital-intensive business model exceeds cash generation capacity, creating debt service vulnerabilities.
Strengths
- 9% year-over-year revenue growth indicates steady demand in service territory
- 18% operating margin demonstrates reasonable operational efficiency for utility sector
- Positive operating cash flow of $829M provides current liquidity support
Risks
- Interest coverage of 1.4x is critically low; industry considers 2.5x minimum safe threshold, leaving minimal margin for error
- Negative free cash flow of -$1.4B despite positive operations indicates unsustainable capital structure and debt sustainability concerns
- Current ratio of 0.96x combined with 1.88x debt-to-equity suggests elevated financial distress risk and potential liquidity stress
Key Metrics to Watch
- Interest coverage ratio - must improve above 2.0x to demonstrate debt service stability
- Free cash flow trajectory - critical to return to positive territory to reduce leverage
- Debt-to-equity ratio and current ratio - both require improvement to reduce financial risk profile
Financial Metrics
Revenue
3.2B
Net Income
384.9M
EPS (Diluted)
$0.83
Free Cash Flow
-1.4B
Total Assets
75.8B
Cash
3.6B
Profitability Ratios
Gross Margin
N/A
Operating Margin
18.0%
Net Margin
12.1%
ROE
2.2%
ROA
0.5%
FCF Margin
-44.7%
Balance Sheet & Liquidity
Current Ratio
0.96x
Quick Ratio
0.96x
Debt/Equity
1.88x
Debt/Assets
0.0%
Interest Coverage
1.43x
Long-term Debt
32.7B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T15:06:46.951764 |
Data as of: 2026-03-31 |
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