PEG Beats EPS, Sales Plunge

Zacks

Public Service Enterprise Group Inc. or PSEG (PEG) reported fourth quarter 2012 earnings of 41 cents per share, up 5.1% from the Zacks Consensus Estimate. However, the results were 6 cents lower than the comparable prior-year figure.

In the reported quarter, GAAP earnings per share were 44 cents, down from 71 cents per share in the year-ago period. The variance of 3 cents between GAAP and operating earnings was due to a gain of 11 cents and an expense of 8 cents related to power storm costs.

In 2012, Public Service Enterprise posted earnings of $2.44 per share, 2.1% higher than the Zacks Consensus Estimate.  

GAAP earnings for 2012 were $2.51 per share versus $2.96 per share in 2011. The difference between operating and GAAP numbers was due to a gain of 15 cents and an expense of 8 cents related to power storm costs.

Total Revenue

Revenue in the reported quarter was $2.40 billion, down 8.7% from the year-ago figure and 17.2% from the Zacks Consensus Estimate.

Full-year 2012 revenues came in at $9.78 billion, lagging the Zacks Consensus Estimate of $10.18 billion by 3.9% and the year-ago figure of $11.07 billion by 11.7%.

In 2012, the company registered a decline in both electric and gas sales volume. Electric sales volumes in 2012 were down by 2.1% year over year to 41,641 million kwh, while gas sales volume were down by 13.5% to 1,645 million therms.

Highlights of the Release

Total operating expenses in 2012 were $7.5 billion, down 10% from the year-ago level. The decline in total expenses was primarily due to a 21.6% year-over-year decline in  energy costs.

Lower expenses did little to boost the operating margins of the company given the very weak top line.

As a consequence, operating income in 2012 dropped 16.9% to $2.27 billion.

Segment Performance

PSEG Power: Segment operating earnings were $122 million in the quarter, down from $134 million in the prior-year period.  This segment benefited from strong cost control but decline in generation due to the impact of Superstorm Sandy and lower realized price of power units sold impacted the results unfavorably.

PSE&G: The segment generated operating earnings of $75 million, down by $24 million from the prior-year quarter. The disruption and damages caused by the storm more than offset the positive contribution from capital investments.

PSEG Energy Holdings: Segment operating earnings were $10 million, down from the prior-year figure of $23 million.

Financial Update

Cash and cash equivalent as of Dec, 31 2012 were $379 million versus $834 million on Dec 31, 2011.

Long-term debt as of Dec 31, 2012, was $7.2 billion versus $7.06 billion as of Dec 31, 2011.

Cash flow from operating activities in 2012 was $2.78 billion compared with $3.55 billion in 2011.

2013 Guidance

The company expects operating earnings per share for 2013 in the range of $2.25 to $2.50. The group expects the year to benefit from its investment programs.

The company forecasts operating earnings from PSEG to range from $580 million to $635 million, earnings from PSEG Power to range from $535 million to $600 million and PSEG Energy Holding/Energy to range from $25 million to $35 million.

Other Company Release

Pike Electric Corporation (PIKE) reported earnings of 67 cents per share in the second quarter of fiscal 2013, surpassing the Zacks Consensus Estimate of 25 cents.

Otter Tail Corporation (OTTR) announced fourth-quarter 2012 operating earnings of 47 cents per share, 56.7% above the Zacks Consensus Estimate of 30 cents.

Brookfield Infrastructure Partners L.P. (BIP) announced fourth-quarter 2012 operating earnings of 25 cents per unit, 56.9% lower than the Zacks Consensus Estimate of 58 cents.

Our Take

Superstorm Sandy impacted the power facilities of the company. The company expects the total cost of restoration to reach $300 million. Restoration of the power lines could take almost two years for completion.

Natural calamities, particularly storms in this part of the world, are unavoidable but the steps taken by the company are commendable. The company recently filed a $3.9 billion request with the New Jersey Board of Public Utilities, with the aim of strengthening its utility network.

Based in Newark, New Jersey, Public Service Enterprise Group Inc. supplies electricity and natural gas to its commercial, residential, and industrial customers primarily in the northeastern and Mid Atlantic United States.  The company currently has a Zacks Rank #3 (Hold).

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