Pepco Holdings Inc. (POM) reported first quarter 2012 earnings from continuing operations of 30 cents per share, beating the year-ago figure of 28 cents and the Zacks Consensus Estimate of 25 cents.
The year-over-year growth stemmed from investments made in its utility infrastructure, which yielded robust transmission and distribution revenues. Favorable income tax adjustments also benefited results.
GAAP earnings during the quarter were 30 cents versus 27 cents in the year-ago period.
Total Revenue
Total revenue at the end of the first quarter was $1.29 billion, down 20.9% from $1.63 billion in the year-ago period. The year-over-year decline was due to lower contributions from all the three operating segments of the company.
Reported revenue missed the Zacks Consensus Estimate of $1.99 billion.
Quarterly Highlights
Total operating expenses of the company at the end of the first quarter of 2012 were $1.15 billion versus $1.48 billion in the year-ago period. The decline stemmed from lower fuel and purchase energy costs. Operation and maintenance expenses also dipped marginally from the prior-year quarter.
Operating income at Pepco was $139 million in first quarter 2012 versus $149 million in the prior-year quarter.
Interest expenses at first quarter end were $65 million versus $62 million at the end of the year-earlier period.
Financials Update
Cash and cash equivalents, including restricted cash, were $74 million as of March 31, 2012, versus $120 million as of December 31, 2011.
Long-term debts of the company as of March 31, 2012 were $3.79 billion, unchanged from the December 31, 2011 level.
Guidance
Pepco Holdings reiterated its 2012 earnings per share guidance in the range of $1.15 to $1.30. The guidance excludes the impact of discontinued operations and assumes normal weather during the year.
Peer Comparison
American Electric Power Co. Inc. (AEP) competes with Pepco Holding Inc. American Electric Power announced operating earnings of 80 cents at par with the Zacks Consensus projection. However, EPS fell short of 2 cents from the prior-year figure.
American Electric Power reported net revenue of $3,625 million in the first quarter, below the Zacks Consensus Estimate of $3,684 million and the year-ago quarter revenue of $3,730 million.
Our View
The company experienced a dip in electric sales in the first quarter due to warmer weather in its service territories, which negatively impacted total revenue. However, we are encouraged to see that the company has increased its electricity consumer base by 2,000 from the year-ago level.
The investments made in its utility infrastructure have helped the company to earn better rates in its service territories. The company has chalked out a plan to invest more in its infrastructure development. We would wait and see whether the investments made by the company in utility infrastructure and customer growth translate into top-line expansion in the forthcoming quarters.
Pepco Holdings currently retains a Zacks #3 Rank (short-term Hold rating).
Based in Washington, District of Columbia, Pepco Holdings, through its two operating divisions, Power Deliver and Competitive Energy, involves in transmission and distribution of electricity, as well as delivery and supply of natural gas.
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