PEG Public Service Enterprise Group Inc

Before the bell, Constellation Energy Group Inc. (CEG) reported its first quarter 2011 results. In the reported quarter, the company with adjusted earnings per share of 63 cents came in below the Zacks Consensus Estimate of 96 cents and year-ago earnings of $1.43.

On a reported basis, including one-time items, earnings per share came in at 35 cents per share versus 95 cents in the year-ago quarter.

In the reported quarter, the variance of 28 cents between reported and adjusted earnings per share came from inclusion of amortized economic value of Constellation Energy Nuclear Group, LLC (CENG) joint venture power purchase agreement (14 cents); inclusion of amortization of Constellation Energy Nuclear Group, LLC joint venture basis difference (8 cents); addition of transaction fees in connection with the Boston Generating assets acquisition in the first quarter of 2011 (5 cents); and addition of credit facility amendment fees incurred in connection with the 2009 stake sale of Constellation Energy Nuclear Group, LLC to Électricité de France (EDF) Group (1 cent).

Operational Results

Constellation Energy's quarterly revenues of close to $3.6 billion were way behind the Zacks Consensus Estimate of $4.1 billion. On a year-over-year basis, revenues decreased marginally by $16.4 million.

Non-regulated revenues rose $95.7 million year over year to approximately $2.6 billion, regulated electric revenues decreased $101.2 million to $650.1 million while regulated gas revenues shrunk $10.9 million to $306.2 million. Overall net income dropped to $70.4 million from $191.5 million in the previous year.

Quarterly Segment Results

Baltimore Gas and Electric Company (BGE) overseeing the company’s regulated business reported adjusted earnings of 39 cents per share, up from 32 cents per share in the year-ago quarter. The increase was the result of higher transmission revenue and the deferral of storm-related costs.

The Generation segment reported adjusted earnings of 34 cents per share, down from 57 cents in the year-ago quarter. The decline was mainly due to the after-effect of the February 2011 ice storms and severe weather in Texas, which led to the temporary shutdown of its Colorado Bend and Quail Run gas plants. Lower realized prices on generation output and higher operating expenses also contributed to the year-over-year variance.

NewEnergy segment reported an adjusted loss of 8 cents per share versus earnings of 54 cents in the year-ago quarter. The decline in earnings is due primarily to the absence of earnings from the divested international commodities operation, along with lower realized margins and the extreme weather in Texas.

Financial Condition

Constellation Energy reported approximately $1.2 billion of cash and cash equivalents at the end of the reported period, compared to more than $2 billion at fiscal-end 2010. Long-term debt (net of current portion) remained flat at around $4.1 billion, compared to fiscal-end 2010.

Outlook

Based in Baltimore, Maryland, Constellation Energy supplies energy products and services in North America. The company retained its fiscal 2011 earnings guidance in the range of $3.10–$3.40 and its 2012 guidance range of $2.40–$2.70.

In the near-term we are maintaining our Zacks #3 Rank (short-term Hold rating) on the stock, in line with its peers like Public Service Enterprise Group Inc. (PEG). This implies that the stock is expected to perform in line with the broader U.S. equity market over the next 1–3 months. We are Neutral on Constellation Energy in the long-term.

 
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