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Why Is PSEG (PEG) Up 4.1% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for PSEG (PEG). Shares have added about 4.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PSEG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Public Service Enterprise Q2 Earnings Miss Estimates

Public Service Enterprise Group Inc., or PSEG, reported second-quarter 2019 adjusted operating earnings of 58 cents per share, which missed the Zacks Consensus Estimate of 62 cents by 6.4%. Moreover, the bottom line dipped 9.4% on a year-over-year basis.

Excluding one-time adjustments, the company reported quarterly earnings of 30 cents per share compared with 53 cents in second-quarter 2018.

Total Revenues

Revenues of $2,316 million in the quarter exceeded the Zacks Consensus Estimate of $2,234 million by 3.7%. Moreover, the figure improved 14.9% from the year-ago quarter’s figure of $2,016 million.

In the reported quarter, electric sales volumes were 9,335 million kilowatt-hours, while gas sales volumes dipped 17% year-over year to 575 million therms.

Under Electric sales, Residential sales volumes were 2,882 million kilowatt-hours, whereas Commercial and Industrial sales volumes accounted for 6,377 million kilowatt-hours. Other sales accounted for 76 million kilowatt-hours.

Total gas sales volumes witnessed a 14% dip in non-firm sales volumes of gas and 19% decline in firm sales volumes of gas.

Highlights of the Release

During the second quarter of 2019, the company reported operating income of $160 million, down from $411 million in the year-ago quarter. Total operating expenses were $2,156 million, up 34.3 % from the year-ago quarter.

Interest expenses in the reported quarter were $137 million compared with $111 million in the year-ago quarter.

Segment Performance

PSE&G: Segment earnings were $227 million, down from $231 million in the prior-year quarter PSE&G’s results in the quarter were driven by continued investment in its infrastructure programs, rate relief, lower weather-related demand, and an increase in the utility’s effective tax rate compared to the higher level of tax reform benefits flowed back to customers during the first quarter of 2019. However, weather for second quarter 2019 was unfavorable compared with the colder weather experienced during the second quarter of 2018.

PSEG Power: Segment losses were $40 million against the segment income of $41 million a year ago. The downside can be attributed to re-contracting and market impacts along with lower realized margins.

PSEG Enterprise/Other: Segment losses were $34 million compared with losses of $3 million in the second quarter of 2018.

Financial Update

Long-term debt as of Jun 30, 2019, was $15,357 million, up from the 2018-end level of $14,462 million.

PSEG generated $1,824 million in cash from operations at the end of first half 2019, compared to $1,633 million generated in the first half of 2018.

2019 Guidance

The company has reaffirmed its 2019 guidance. Adjusted earnings are projected to be $3.15-$3.35 per share.

PSE&G’s operating earnings are anticipated to be $1.200-$1.230 million. The company expects PSEG Power operating earnings to be $395-$460 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 6.22% due to these changes.

VGM Scores

Currently, PSEG has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, PSEG has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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