Public Service Enterprise Misses on Q2 Earnings, Guides Well

Zacks

Public Service Enterprise Group Inc. (PEG) reported second quarter 2014 operating earnings of 49 cents per share, below the Zacks Consensus Estimate of 53 cents by 7.5% due to lower sales across the board. However, quarterly earnings were up by a penny from the year-ago number. The year-over-year gain reflects investments made by the company in its stable rate regulated business.

 

On a GAAP basis, quarterly earnings were 42 cents per share versus 66 cents per share a year ago.

Total Revenue

Revenue in the reported quarter was $2,249.0 million, down 2.6% from the year-ago figure of $2,310.0 million. Revenue, however, came in above the Zacks Consensus Estimate by 0.6%.

During the reported quarter, Electric sales volume decreased 1% year over year to 9,628 million kwh, while gas sales volume shot up 46.2% to 920 million therms.

Highlights of the Release

Total operating expenses were $1,884 million, up 11.0% year over year. The increase in total expenses was primarily due to a 23.8% rise in operation and maintenance (O&M) expenses and a 4.5% increase in energy costs.

Interest expenses in the reported quarter declined to $94 million from $101 million in the year-ago period.

Segment Performance

PSEG Power: Segment operating earnings were $87.0 million versus $120.0 million in the prior-year period. The results reflect the impact on production and O&M expenses associated with an extended outage at the Salem 2 nuclear facility. This was accompanied with the installation of equipment at the Linden gas-fired combined cycle facility to increase the unit’s capacity.

PSE&G: The segment generated operating earnings of $151.0 million, up 24.8% year over year. The upside was driven by increased revenue associated with a greater level of investment and a reduction in operating as well as financial expenses.

PSEG Enterprise/Other: The segment generated operating earnings of $7 million, up 250% from $2 million in the year-ago period.

Financial Update

As of Jun 30, 2014, the company’s cash balance was $570 million compared with $164 million as of Jun 30, 2013.

Long-term debt as of Jun 30, 2014 totaled $8.6 billion, up from $8.1 billion at 2013 end.

In the first six months of 2014, net cash flows provided by operating activities were $1.4 billion versus $1.3 billion in the year-ago comparable period.

2014 Guidance

PSE&G’s operating earnings are expected to range within $705 million and $745 million. PSEG Power's operating earnings are forecast in the $550 to $610 million range. PSEG Enterprise/Other’s operating earnings are expected to range within $35 million and $40 million.

Public Service Enterprise now expects 2014 operating earnings per share to be on the higher end of its previous guided range of $2.55 to $2.75.

Other Company Releases

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, the reported number 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.

Our View

Public Service Enterprise Group failed to keep the earnings streak alive this quarter. However, its PSE&G division performed well in the second quarter and is focused on providing more than 50% of 2014 guided operating earnings. The company’s multi-billion dollar capital program is also on track while its positive natural gas supply position is expected to yield benefits for customers and shareholders alike.

Public Service Enterprise Group currently holds a Zacks Rank #3 (Hold).

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