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Dominion Beats Earnings Estimates

Zacks Equity Research

Dominion Resources Inc. (D) reported first quarter 2014 operating earnings of $1.04 per share, 8.3% higher than the Zacks Consensus Estimate of 96 cents.

Earnings also surpassed the year-ago figure of 83 cents by 25.3% and even sailed past the expected guidance range of 85 cents to $1.00 for the quarter. The strong performance came on the back of favorable weather in its electric service territory and lower operating expenses.

GAAP earnings were 65 cents versus 86 cents in the year-ago quarter. The difference between GAAP and operating earnings in the reported quarter was due to a one-time impact of 39 cents from discontinued operations.

Total Revenue

Dominion’s operating revenue of $3.63 billion in the first quarter increased 4.5% year over year. The improvement in the top line was primarily due to higher contribution from Dominion Virginia Power and Dominion Generation, marginally offset by lower contribution from Dominion Energy.

Total revenue also came in ahead of the Zacks Consensus Estimate of $3.47 billion by 4.5%.

Segment Update

Dominion Virginia Power recorded revenues of $504 million in the first quarter of 2014, up 8.2% year over year.

Dominion Energy reported revenues of $642 million, down 2.8% year over year.

Dominion Generation’s revenues increased 5.2% year over year to $2.28 billion.

Operational Update

Total operating expenses in the first quarter decreased 1.4% year over year to $2.49 billion. The decline in total expenses was primarily due to a 9.5% year-over-year drop in energy fuel and other energy related purchases. This was marginally offset by a 14.1% increase in purchased gas expenses.

Interest and related charges in the reported quarter were $236 million versus $226 million in the year-ago quarter.

Financial Update

Dominion exited the quarter with cash and cash equivalents of $228 million, up from $316 million as of Dec 31 2013.

Long-term debt at quarter end increased to $18 billion from $16.88 billion at prior-year end.

Cash from operating activities in the first three months of 2014 decreased to $0.75 billion from $1.05 billion in the comparable year-ago period.

Looking Ahead

Dominion expects to deliver second quarter operating earnings in a range of 55 cents to 65 cents per share. The second quarter results are likely to benefit from more normal temperatures in its service territories and higher weather-normalized kilowatt sales and revenues related to electric transmission growth projects. However, higher interest and operating expenses are likely to offset these positives to some extent.

Dominion Resources reaffirmed 2014 operating earnings guidance of $3.35 to $3.65 per share.

Other Company Releases

American Electric Power Co., Inc.’s (AEP) earnings per share of $1.15 in the first quarter 2014 surpassed the Zacks Consensus Estimate of 91 cents by 26.37%.

Entergy Corp. (ETR) reported first-quarter earnings of $2.29 per share, beating the Zacks Consensus Estimate by 8.5%

DTE Energy Co. (DTE) reported first-quarter 2014 operating earnings per share of $1.69, beating the Zacks Consensus Estimate of $1.41 by 19.8%.

Our View

Dominion Resources was able to beat expectation on the back of colder-than-normal weather in its services territories. The favorable weather added 5 cents to total earnings in the reported quarter.

Though weather driven sales are temporary, the company also succeeded in boosting electric delivery customers by 0.9% and most importantly electric delivery volumes by 6.1% from the comparable year-ago period.

Dominion is expanding its green generation portfolio. In the reported quarter the company acquired six solar projects, adding 139 megawatts to generation assets.

Dominion Resources holds a Zacks Rank #2 (Buy).

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