American Electric Power Company Inc.
) reported its third-quarter 2012 results before the opening bell
today. In the reported quarter, the company posted operating
earnings of $1.02, in line with the Zacks Consensus Estimate.
However, it was below the year-ago figure of $1.17.
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The year-over-year decline reflects the negative impacts of
customer switching in Ohio, drought and associated low-water
conditions that hampered river transportation business. Moreover,
restoration costs associated with the June 29 storm that led to
lack of power supply to 1.4 million customers in five states also
hurt the company's performance. However, these were partially
offset by cost control and positive rate changes across multiple
Including a charge of 2 cents per share related to the
Southwestern Electric Power Co. Texas jurisdictional cost cap on
the construction of the John W. Turk Jr. coal-fueled power plant
in Arkansas, GAAP earnings reported during the quarter were $1.00
versus $1.92 in third quarter of 2011.
Quarterly revenue at American Electric Power was $4,156 million,
lower than the Zacks Consensus Estimate by $461 million. The
figure also fell below the year-ago figure of $4,333 million.
During the reported quarter, maintenance and other operation
expenses were $1,033 million versus $1,026 million.
Operating earnings were $496 million in the reported quarter,
lower than $566 million in the prior-year quarter. The company
reported net earnings of $487 million, down from the year-ago
figure of $928 million.
Quarterly Segment Performance
Operating earnings from Utility Operations during third-quarter
2012 were $479 million, down $63 million year-over-year. The
decline reflects customer switching in Ohio, higher storm
restoration costs and cooler temperatures compared to the
previous year period. These negatives were, however, partially
offset by the positive impact of successful rate proceedings and
lower spending as a result of cost- containment efforts.
Operating loss from the company's River Operations was $1 million
versus earnings of $17 million in the year-ago period. The
significant downside reflects drought in 2012 that significantly
impacted river conditions.
Operating earnings from the company's Transmission Operations
were $14 million, down $5 million year over year.
Operating earnings from Generation and Marketing, which includes
American Electric's non-regulated generating, marketing and risk
management activities primarily in the Electric Reliability
Council of Texas (ERCOT) area, increased by $2 million to $10
million year over year.
All Other, which includes the Parent Company and other
investments, improved $4 million to a loss of $6 million compared
with a loss of $10 million last year.
Cash and cash Equivalents at the end of September 30, 2012 were
$443 million versus $221 million at the end of December 31, 2011.
Total debt was $18,443 million versus $18,166 million at the end
of December 31, 2011.
American Electric Power's earnings guidance remains suspended on
account of the ongoing Ohio regulatory proceedings. The company
has received orders from the Public Utilities Commission of Ohio
regarding capacity charges, the Electric Security Plan and the
corporate separation plan. However, still some of these orders
are subject to rehearing. Hence, the company has decided to hold
back its guidance.
American Electric Power Company posted in line earnings, but
missed the revenue estimate. The quarter was significantly
hampered by customer switching and weather ailments.
Going forward, key growth drivers of the company are growth
through transmission network expansion, cost control measures and
Turk Plant, the first ultra-supercritical coal plant in the
nation, which is expected to begin generating electricity before
the end of 2012.
However, tepid economies in a number of its service states
restrict opportunities for growth. Also, uncertainty surrounding
pending regulatory cases, its predominantly fossil-fuel based
generation assets and lower wholesale sales are matters of
concern. American Electric Power presently retains a short-term
Zacks #3 Rank (Hold) that corresponds with our long-term Neutral
recommendation on the stock.
Columbus, Ohio-based American Electric Power is a public utility
holding company which, through directly and indirectly owned
subsidiaries, generates, transmits, and distributes electricity,
natural gas, and other commodities. The company derives revenues
mainly from power-generating activities.
Some of its main competitors are