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Public Service Beats Earnings, Lags Rev

Zacks Equity Research

Public Service Enterprise Group Inc. or PSEG (PEG) reported first quarter 2013 earnings of 85 cents per share, beating the Zacks Consensus Estimate of 74 cents by 14.9%. This was mainly attributable to increased investment at PSE&G and solid performance from PSEG Power segments. However, earnings were in line with the year-ago figure.

Total Revenue

Revenue in the reported quarter was $2,786.0 million, down 3.1% from the year-ago figure of $2,875.0 million and 6.4% from the Zacks Consensus Estimate of $2,976.0 million.

In the first quarter, the company registered a boost in both electric and gas sales volume. Electric sales volumes in the reported quarter increased 0.9% year over year to 9,923 million kwh, while gas sales volume were up 17.1% to 871 million therms.

Highlights of the Release

Total operating expenses were $2,176.0 million, up 4.0% from the year-ago level. The increase in total expenses was primarily due to a 13.1% year-over-year rise in operating and maintenance costs as well as a 13.3% jump in depreciation and amortization expenses.

Higher expenses compounded by a very weak top line led to lower operating income. As a consequence, operating income dropped 22.1% to $610.0 million.

Segment Performance

PSEG Power: Segment operating earnings were $250.0 million in the quarter, up from $196.0 million in the prior-year period. A solid energy market, higher capacity prices, and an increase in generation resulted in the upswing.

PSE&G: The segment generated operating earnings of $179.0 million, down 9.1% from the prior-year quarter. Results reflect the absence of tax settlement in the year-ago quarter that more than offset the positive contribution from capital investments.

PSEG Energy Holdings: Segment operating earnings were $4.0 million, down from the prior-year figure of $39.0 million.

Financial Update

Cash and cash equivalents as of Mar 31, 2013 were $420.0 million versus $379.0 million on Dec 31, 2012.

Long-term debt as of Mar 31, 2013 was $7,417.0 million versus $7,173.0 million at 2012 end.

Cash flow from operating activities was $877.0 million compared with $1,088.0 million in the first quarter 2012.

2013 Guidance

The company reaffirmed operating earnings per share for 2013 in the range of $2.25 to $2.50. The group expects the year to benefit from its proposed 10-year $3.9 billion Energy Strong investment program.

The company forecasts operating earnings from PSE&G to range from $580 million to $635 million, earnings from PSEG Power to range from $535 million to $600 million and PSEG Energy Holding/Energy to range from $25 million to $35 million.

Zacks Rank

The company currently has a Zacks Rank #3 (Hold). Stocks that look better positioned are Brookfield Infrastructure Partners L.P. (BIP), CMS Energy Corporation (CMS) and Empresa Nacional de Electricidad S.A. (EOC), all with a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CMS

Read the Full Research Report on BIP

Read the Full Research Report on PEG

Read the Full Research Report on EOC

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