Atlanta-based Mirant 's (NYSE: MIR) surprising second-quarter results last week might have caused analysts to wonder whether they're even worth their salaries -- although they probably didn't offer to give their paychecks back. For investors in the independent power wholesaler and operator, however, higher profits couldn't keep fears of a more troublesome future at bay.

On an adjusted basis, earnings from continuing operations tipped the scales at $0.90 per share, versus analyst estimates of just $0.49 per share. But second-quarter sales disappointed despite rising to $496 million. The results reflect effective hedging and cost-cutting in an ugly economic environment.

Hedge hogs
Companies like Mirant and its peers, such as Calpine (NYSE: CPN) and AES (NYSE: AES), rely on derivatives to protect their financial interests through hedging. Thanks largely to hedging, Mirant has posted a nice profit so far this year, even despite falling commodity prices, weaker demand, and narrowing margins.

Indeed, in its conference call, the company's management described just how much it relies on the commodities markets -- not just in its operations but also in predicting future demand and the timing of a potential recovery. In particular, Mirant relies on forward power prices to estimate its future output. Based on where it sees prices going for its most widely used commodities -- coal, gas, and oil -- it enters into derivative contracts. This strategy lets the company forecast its future generation and earnings out for as far as its analysts can predict the price movements of the underlying commodities.

Moment of truth
Notwithstanding the bountiful second-quarter profits, management merely reaffirmed its prior 2009 guidance and lowered 2010 adjusted EBITDA projections by 6% to $570 million. Furthermore, if commodity markets don't behave as anticipated, actual results could differ again materially from those expectations.

That alone makes Mirant a risky proposition. Granted, compared with other diversified utility companies, such as CenterPoint Energy (NYSE: CNP), CMS Energy (NYSE: CMS), or NV Energy (NYSE: NVE), Mirant has high cash per share and a low debt-to-equity, which means that it can support its working-capital needs or mitigate a potential derivative snafu in the future.

But if the recovery does finally come next year, investing in a company with falling earnings is the last thing you'd want to do. Shareholders apparently agree, having driven the stock down after the announcement. Until the company turns things around, Mirant shares don't look attractive to me.