Earnings Preview: PEG - Analyst Blog
October 22 2012 - 11:50AM
Zacks
Public Service Enterprise
Group Inc. (PEG), a regulated electric and natural gas
distributor, is expected to release its third quarter 2012 results
on November 1, 2012, before the bell. The Zacks Consensus Estimate
for the third quarter of 2012 is 71 cents per share (year-over-year
decrease of 14.46%) on revenues of $2,771 million (year-over-year
increase of 5.76%).
Second-quarter 2012, a Synopsis
Public Service Enterprise’s second-quarter 2012 operating earnings
per share (“EPS”) were 43 cents, 2 cents below the Zacks Consensus
Estimate of 45 cents and far below the year-ago figure of 59 cents
per share.
In the second quarter of 2012, GAAP EPS was 42 cents, down from 63
cents per share in the year-ago period. The variance between GAAP
and operating earnings was due to a gain of 1 cent on nuclear
decommissioning trust (“NDT”) Fund Related Activity and
mark-to-market loss of 2 cents at PSEG Power.
Revenue in the second quarter of 2012 was $2.1 billion, down from
the year-ago figure of $2.47 billion. The top line was also lower
than the Zacks Consensus Estimate by $295 million.
Residential electric sales were 3,052 million kilowatt Kwh while
Commercial & Industrial sales were 6,857 million Kwh in the
reported quarter. Total sales were 9,978 million Kwh.
Total operating expenses in the quarter under review were $1.67
billion, down 9.9% year over year. Lower operating expenses were
offset by a decline in revenue, resulting in an operating income of
$433 million, down 30.2% year over year.
Read our full coverage on this earnings report: PEG Misses on All
Counts
Guidance for 2012
Public Service Enterprise expects earnings in the range of $2.25 to
$2.50 per share for full year 2012. It indicated that fossil
operations helped in controlling costs and thereby mitigated the
impact of a warmer winter, lower demand and a decline in gas
prices. Going forward, on the basis of this operational excellence,
it expects to generate good results.
Zacks
Consensus
The analysts covered by Zacks expect Public Service Enterprise
Group to post third-quarter 2012 earnings of 71 cents per share,
lower than 83 cents delivered in the prior-year quarter. Currently,
the Zacks Consensus Estimate ranges between earnings of 66 cents
and 76 cents a share.
For 2012, the Zacks Consensus Estimate stands at $2.39 per share,
lower than its prior-year earnings of $2.74 per share. The current
Zacks Consensus Estimate ranges between $2.25 and $2.50 per
share.
Estimate Revisions
Trend
Agreement
We see a flat trend for estimates for the third quarter of 2012.
Among the 9 estimates, no estimate moved upward or downward over
the last 30 days. The flattish trend is also reflected for
full-year 2012.
Magnitude
The Zacks Consensus Estimate for the third quarter 2012 inched up
by a penny to 71 cents over the last 30 days. For full year 2012
the consensus estimate remained static at $2.39 for the last 30
days.
Surprise History
With respect to earnings surprises, Public Service Enterprise Group
has topped the Zacks Consensus Estimate in three out of the last
four quarters in the range of (4.44)% to 26.87%. The average
surprise over the last four quarter remained a positive 6.46%. The
earnings miss in the last quarter was the lowest at (4.44)%.
Our Recommendation
Public Service Enterprise Group has a solid portfolio of regulated
and non-regulated utility assets that offer a stable earnings base
and substantial long-term growth potential. Going forward, we
believe that the low-cost nuclear fleet, assumed rate relief and
added generating capacities will drive Public Service’s earnings
growth. Public Service has been pursuing growth opportunities in
the core U.S. market and increasing capital allocation in projects
that provide good risk-adjusted returns.
Like its peer, Northeast Utilities (NU), the
company presently retains a short-term Zacks #2 Rank (Buy)
providing investors with a window of opportunity for short-term
gains.
However, over the longer run, we are concerned about the increasing
cost of coal, higher pension & financial costs, and power-price
volatility. Thus, we maintain our long-term Neutral recommendation
on the stock.
Based in Newark, New Jersey, Public Service Enterprise Group
Incorporated 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).
NORTHEAST UTIL (NU): Free Stock Analysis Report
PUBLIC SV ENTRP (PEG): Free Stock Analysis Report
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