Utility service provider
Pepco Holdings Inc.
) is slated to release its second-quarter 2012 earnings results
before the market open on August 7, 2012.
First Quarter Performance
Pepco Holdings Inc. reported first quarter 2012 earnings of 30
cents per share, beating the year-ago figure of 28 cents and the
Zacks Consensus Estimate of 25 cents. The year-over-year growth
stemmed from investments made in its utility infrastructure, which
yielded robust transmission and distribution revenues. Favorable
income tax adjustments also benefited results.
Total revenue at the end of the first quarter was $1.29 billion,
down 20.9% from $1.63 billion in the year-ago period. The
year-over-year decline was due to lower contributions from all the
three operating segments of the company.
Total operating expenses at the end of the first quarter of 2012
were $1.15 billion versus $1.48 billion in the year-ago
period. The decline stemmed from lower fuel and purchase
energy costs. Operation and maintenance expenses also dipped
marginally from the prior-year quarter.
Pepco Holdings reiterated its 2012 earnings per share guidance in
the range of $1.15 to $1.30. The guidance excludes the impact of
discontinued operations and assumes normal weather during the
The Zacks Consensus Estimate for the second quarter 2012 is 32
cents per share, down 23.8% from 42 cents reported in the year-ago
quarter. The current Zacks Consensus Estimate ranges between 29
cents per share and 39 cents per share.
The full year 2012 Zacks Consensus Estimate is $1.23, down 1.78%
from $1.25 reported in the previous year. The current Zacks
Consensus Estimate ranges between $1.18 per share and $1.25 per
Estimate Revisions Trend
The past 30 days have seen one of six estimates declining for
the second quarter, while none moved in the opposite direction.
There were no changes in the quarterly estimates in the last 7
For full year 2012, of the 9 available estimates, there has been
1 revision each, in the positive and negative direction, in the
last 30 days. There were no changes in the estimates in the prior 7
The Zacks Consensus Estimate for the second quarter inched down by
4 cents in the last 30 days. Similarly, for full-year 2012, the
consensus estimate dropped by a penny in the past 30 days. For the
past 7 days the consensus earnings estimates remained static both
for the second quarter and full year 2012.
With respect to earnings surprise, the company's performance was
mixed in the last four quarters. The results of the company
surpassed our expectation in two of the last four quarters, while
earnings fell short of expectation in the other two quarters.
The earnings surprise in the last four quarters ranged from
(16.67%) to 35.48%. The average surprise over the last four
quarters remained a positive 6.05%.
Pepco Holdings has gradually modified itself to become a pure play
regulated utility through divesting its unregulated businesses. The
company continues to make significant investments in its service
territories to improve the distribution and transmission systems
and provide better services to its consumers. The current dividend
yield of 5.4% is above the industry average of 3.3%.
Like other regulated utility operators, this company too suffers
from fluctuating weather conditions in its service territories. We
believe the adherence to existing and new regulatory
developments in its service territories will increase the operating
costs of the company and impact margins.
Evaluating the pros and cons, we have decided to retain our
Neutral recommendation of the company. Pepco Holdings Inc. competes
CMS Energy Corp.
). The company has a Zacks #3 Rank implying a short-term Hold
rating on the stock.
Based in Washington, District of Columbia (DC), Pepco Holdings
Inc. engages in both regulated utility and unregulated businesses.
Pepco Holdings Inc., also referred to as PHI, is one of the largest
energy delivery companies in the Mid-Atlantic region, delivering
power to customers in Delaware, the District of Columbia, Maryland
and New Jersey. It also supplies natural gas to customers in
CMS ENERGY (CMS): Free Stock Analysis Report
CALPINE CORP (CPN): Free Stock Analysis Report
NISOURCE INC (NI): Free Stock Analysis Report
PEPCO HLDGS (POM): Free Stock Analysis Report
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