FirstEnergy Beats on Earnings, Lags Y/Y
Diversified energy company FirstEnergy Corp. (FE) announced fourth-quarter 2013 operating earnings of 75 cents per share, beating the Zacks Consensus Estimate of 68 cents by 10.3%. However, the results lagged the year-ago earnings of 80 cents by 6.2%.
The year-over-year decline reflects higher operating & maintenance expenses and increase in purchase power expenses, partially offset by lower fuel expenses, higher investment income and lower interest expenses.
Including one-time charges and gains of 41 cents per share, GAAP earnings per share were 34 cents versus a loss of 35 cents in the prior-year quarter.
2013 operating earnings were $3.04 per share, 2.7% higher than the Zacks Consensus Estimate of $2.96. However, the bottom line fell short of the year-ago earnings of $3.34 per share by 9%.
Total Revenue
FirstEnergy generated total revenue of $3.64 billion in the fourth quarter, up 4.34% year over year. The strong performance of the regulated as well as the competitive energy services segment benefited results. However, the top line of the company missed the Zacks Consensus Estimate of $4.8 billion by 24.3%.
2013 total revenue was $14.9 billion, 4.6% lower than the Zacks Consensus Estimate of $15.6 billion and also down from $15.2 billion in the prior year by 2.3%.
Highlights of the Release
FirstEnergy's total electric distribution deliveries in the reported quarter increased 4% from the prior-year level. Due to a much harsher winter, demand from residential and commercial customers increased 3% each from the comparable prior-year period. Demand from industrial customers increased 6% from the prior year.
Interest expenses in the reported quarter were $0.24 billion, down marginally from the year-ago level of $0.25 billion. The decline in interest expenses was primarily due to long-term debt repayments.
Financial Update
FirstEnergy's cash on hand as of Dec 31, 2013, was $0.21 billion versus $0.17 billion as of Dec 31, 2012.
Cash from operating activities in 2013 was $0.99 billion, down from $1.04 billion in 2012.
Long-term debt and other long-term obligations as of Dec 31, 2013, were $15.8 billion versus $15.1 billion a year ago.
Guidance
FirstEnergy expects operating earnings per share for 2014 in a range of $2.45 to $2.85 per share, a little lower than the levels achieved in 2013. GAAP earnings for 2014 are expected in the range of $2.38 to $2.82 per share.
First quarter operating earnings are expected in a range of 35 cents to 45 cents while GAAP earnings are expected in a range of 50 cents to 60 cents.
Other Company Release
American Electric Power Company Inc. (AEP) reported fourth-quarter 2013 operating earnings of 60 cents per share, beating the Zacks Consensus Estimate by 7.1%.
Dominion Resources, Inc. (D) reported fourth-quarter 2013 operating earnings of 80 cents per share, missing the Zacks Consensus Estimate by 9.1%.
Duke Energy Corp. (DUK) reported adjusted fourth quarter 2013 earnings of $1.00 per share that came in ahead of the Zacks Consensus Estimate of 94 cents by 6.4%.
Our View
FirstEnergy posted mixed results with the bottom line beating the Zacks Consensus Estimate and the top line missing the mark.
In the next four years, FirstEnergy plans to invest approximately $4.2–$4.6 billion as transmission capital expenditure. This will enable the company to strengthen its existing infrastructure.
Undoubtedly, the tough decision taken by management to reduce the dividend in Jan 2014 dented investors’ confidence in the stock. However, we believe the systematic investments taken by FirstEnergy will provide incremental returns to restore the confidence of its investors.
FirstEnergy currently has a Zacks Rank #3 (Hold).
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