PG&E Corp Misses Q2 Earnings Estimates, Hit by Higher Costs

Zacks

PG&E Corporation’s (PCG) adjusted operating earnings per share of 69 cents in the second quarter of 2014 lagged the Zacks Consensus Estimate of 75 cents. The reported figure also trailed the year-ago number of 79 cents by 12.7%.

The uninspiring earnings reflect the negative impact of unrecovered costs in the Natural Gas business.

 

GAAP earnings during the quarter were 57 cents versus 74 cents in the year-ago quarter. The variance between GAAP and pro forma earnings was due to a 12 cent charge related to natural gas assets.

Revenue Update

PG&E’s quarterly top line increased 4.7% to $3,952 million from $3,776 million in the year-ago period. Revenue also surpassed the Zacks Consensus Estimate of $3,936 million.

The Electric business generated revenues of $3,233 million in the quarter (up 5.7% year over year), while Natural Gas clocked revenues of $719 million (up 0.3%).

Expenses

On the cost front, total operating expenses stood at $3,434 million, up 9.4% from the year-earlier level of $3,140 million. The rise was mainly due to the upswing in cost of electricity, natural gas along with operation and maintenance cost.

At the Peer End

CMS Energy Corp. (CMS) reported second quarter 2014 earnings per share of 30 cents both on an adjusted and GAAP basis. Quarterly earnings surpassed the Zacks Consensus Estimate of 26 cents by 15.4% and the year-ago number by a penny on higher revenues.

Entergy Corporation (ETR) posted second quarter 2014 operational earnings of $1.11 per share, higher than the year-ago number of $1.01 per share by 9.9%. However, earnings failed to surpass the Zacks Consensus Estimate of $1.14. Quarterly earnings increased on the back of strong performance from its Utility and Entergy Wholesale Commodities units.

American Electric Power Company Inc. (AEP) reported second quarter 2014 operating earnings of 80 cents per share, beating the Zacks Consensus Estimate of 75 cents by 6.7%. The quarterly figure also improved 9.6% from the year-ago adjusted profit of 73 cents per share. The upbeat performance was supported by investments in infrastructure and transmission as well as system improvement.

Zacks Rank

Currently, PG&E carries a Zacks Rank #3 (Hold).

The San Bruno accident, which occurred way back in 2010, continues to cast a shadow on the company’s financial results. The company is required to provide a timely and balanced resolution of the penalties related to the accident.

Recently, PG&E’s main subsidiary and California’s largest regulated electric and gas utility – Pacific Gas and Electric Company (Pacific Gas) – was charged with obstruction of the National Transportation Safety Board (:NTSB) investigation in connection with the fatal San Bruno explosion. A federal grand jury charged Pacific Gas of lying to the federal body about the deadly pipeline explosion.

Moreover, Pacific Gas was charged of “knowingly and willfully” violating 27 counts of the Natural Gas Pipeline Safety Act in a revised indictment. The new indictment replaced the earlier indictment that contained 12 counts related to PG&E's safety practices, but not obstruction. Federal prosecutors accused the utility of knowingly concealing from the NTSB that it did not assess many of its older natural gas pipelines as high risk from 2009 to 2011.

In May 2014, PG&E had already committed $2.7 billion over the next several years for safety-related work following the San Bruno incident. With this new indictment, the utility could face a fine based on twice the losses suffered by victims of the blast, totaling $1.13 billion.
 

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