PEG Barely Beats, Misses Sales - Analyst Blog
November 01 2011 - 11:50AM
Zacks
Public Service Enterprise Group Inc. (PEG) or
PSEG reported third quarter 2011 operating earnings per share of 83
cents, a penny above the Zacks Consensus Estimate. However,
earnings were lower than the year-ago figure of $1.03 per
share.
In the reported quarter, GAAP EPS was 52 cents, down from $1.08
per share in the year-ago period. The variance between GAAP and
operating earnings was due to an after-tax charge of 34 cents per
share related to the reserve for Energy Holdings’ lease receivable
from Dynegy Inc. (DYN), gain on NDT Fund Related
Activity (“PSEG Power”) of 1 cent and gain on mark-to market gain
of 2 cents per share.
Operational Performance
Revenue in the reported quarter was $2.6 billion, down from the
year-ago figure of $3.1 billion. The top line was also lower than
the Zacks Consensus Estimate by $407 million.
Public Service Enterprise Group generated operating income of
$556 million, far lower than $971 million in the third quarter
2010. Net income for the reported quarter also declined to $420
million from $521 million in the year-ago period.
Residential sales were 4,683 million Kwh while Commercial &
Industrial sales were 7,874 million Kwh in the reported quarter.
Total sales were 12,621 million Kwh.
Segment Performance
PSEG Power: Segment operating earnings were
$258 million in the quarter versus $338 million in the prior-year
period. The results reflect a decline in realized energy and
capacity prices, decline in volume, higher depreciation expense
coupled with lower capitalized interest, increase in operation and
maintenance expense and other miscellaneous items. These were,
however, partially offset by trading related losses that were
incurred in the year-ago quarter.
PSE&G: The segment generated operating
earnings of $154 million versus $155 million in the year-ago
quarter. The results reflect increased capital investment, steeper
operation and maintenance expense, storm-related costs, tree
trimming expense, depreciation expense and absence of gains that
were generated in the year-ago quarter.
However, these were partially offset by an annualized increase
in transmission revenue. Moreover, a return on investments made
under capital adjustment clauses supporting investment in
renewables and electric and gas infrastructure programs also added
to earnings for the quarter.
PSEG Energy Holdings: Segment operating
earnings were $4 million compared with $24 million in the
prior-year period. The downside reflects the absence of gains in
the current quarter from the termination of leases in third quarter
2010.
Outlook
Based on the performance of the company, exiting the third
quarter, it expects full-year 2011 earnings per share on the higher
end of the previously forecast $2.50–$2.75 range.
The company is focused on meeting its operational goals. The
investments made thus far to replace inefficient, older generating
units and upgrade the environmental profile of existing facilities
place the company in a favorable position to meet stringent
regulations and direct capital toward growth opportunities.
Our Take
Public Service Enterprise Group’s robust portfolio of regulated
and non-regulated utility assets offers a steady earnings base and
significant long-term growth prospects. The company remains focused
on operational excellence, financial strength and disciplined
investment. Going forward, the energy company’s growth will be
driven by a low-cost nuclear fleet, assumed rate relief and added
generating capacities.
However, the increasing cost of coal, higher pension and
financial costs, power-price volatility and challenges from the
Internal Revenue Service are areas of concern. We see shares of the
company performing in line with the broader market. The company
presently retains a short-term Zacks #3 Rank (Hold) that
corresponds with our long-term Neutral recommendation on the
stock.
Public Service Enterprise Group Incorporated, based in Newark,
New Jersey, is a diversified utility holding company. Its
operations are mostly located in the Northeastern and Mid-Atlantic
parts of the U.S.
Public Service Enterprise principally operates through three key
subsidiaries: Public Service Electric and Gas Company (PSE&G),
PSEG Power LLC (PSEG Power) and PSEG Energy Holdings LLC (PSEG
Energy). The company mainly competes with FirstEnergy
Corporation (FE) and Consolidated Edison
Inc. (ED).
CONSOL EDISON (ED): Free Stock Analysis Report
PUBLIC SV ENTRP (PEG): Free Stock Analysis Report
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