Public Service Enterprise Group Inc.
) or PSEG reported first quarter 2012 results. During the quarter,
operating earnings per share ("EPS") were 85 cents, far above our
expectation of 67 cents but in line with the year-ago figure.
In the reported quarter, GAAP EPS was 97 cents, up from 91 cents
per share in the year-ago period.
The variance between GAAP and operating earnings was due to a 1
cent gain on each - NDT Fund Related Activity and Lease Related
Activity - as well as a mark-to market gain of 10 cents.
Revenue in the reported quarter was $2.88 billion, down from the
year-ago figure of $3.35 billion. The top line was also lower than
the Zacks Consensus Estimate by $355 million.
Residential sales were 2,990 million Kwh while Commercial &
Industrial sales were 6,751 million Kwh in the reported quarter.
Total sales were 9,834 million Kwh.
Total operating expenses in the quarter under review was $2.09
billion, down 16.3% year over year. Public Service Enterprise Group
generated operating income of $783 million, down 8.5% year over
Segment operating earnings were $196 million in the quarter, down
from $267 million in the prior-year period. The downside reflects
warmer than normal weather conditions and price decline in energy
and capacity as well as lower fuel costs. However, these negatives
were partially compensated by continued strength in nuclear
operations along with greater output from the combined cycle
natural gas fleet.
The segment generated operating earnings of $197 million, up 20.9%
year over year. The significant improvement was driven by higher
transmission formula rates, return on investments in energy
efficiency, solar and infrastructure programs, and settlement of
tax audits for the period in between 1997 - 2006, which led to
lowering of one-time tax expense. However, these positives were
partially offset by warmer than normal weather, increase in
depreciation expense and higher operating and maintenance
PSEG Energy Holdings:
Segment operating earnings were $39 million, significantly up from
the prior-year figure of $1 million. The results were driven by
settlement with the Internal Revenue Service of the offshore lease
transactions for all tax years, and a settlement of all federal
audit issues for tax years 1997 - 2006.
At the end of March 31, 2012, long-term debt was $7 billion
compared with $7.06 billion at the end of December 31, 2011.
Net cash provided by operating activities during the quarter was
$1.09 billion compared with $1.04 billion in the prior-year
The company indicated that fossil operations helped in
controlling costs and thereby mitigated the impact of a warmer
winter, lower demand and a decline in gas prices. Going forward, on
the basis of this operational excellence, PEG expects to generate
superior results. The company expects operating earnings in the
range of $2.25 to $2.50 per share in fiscal 2012.
We believe that Public Service Enterprise Group has a solid
portfolio of regulated and non-regulated utility assets that offer
a stable earnings base and substantial long-term growth potential.
Key growth drivers of the company are higher levels of capital
investment, hedging, a low-cost nuclear fleet, assumed rate relief
and added generating capacities.
However, the increasing cost of coal, higher pension and
financial costs, and power-price volatility are areas of
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
Public Service Enterprise Group Inc., based in Newark, New
Jersey, is a diversified utility holding company. Its operations
are mostly located in the Northeastern and Mid-Atlantic parts of
the U.S. Public Service Enterprise principally operates
through three key subsidiaries: Public Service Electric and Gas
Company (PSE&G), PSEG Power LLC (PSEG Power) and PSEG Energy
Holdings LLC (PSEG Energy). The company mainly competes with
UIL Holdings Corporation
PUBLIC SV ENTRP (PEG): Free Stock Analysis
UIL HOLDINGS CP (UIL): Free Stock Analysis
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