Before the bell,
Public Service Enterprise Group Inc.
) or PSEG reported second quarter 2012 results. During the quarter,
operating earnings per share ("EPS") were 43 cents, 2 cents below
the Zacks Consensus Estimate of 45 cents and far below the year-ago
figure of 59 cents per share.
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In the reported quarter, GAAP EPS was 42 cents, down from 63 cents
per share in the year-ago period.
The variance between GAAP and operating earnings was due to a gain
of 1 cent on nuclear decommissioning trust ("NDT") Fund Related
Activity and mark-to-market loss of 2 cents at PSEG Power.
Revenue in the reported quarter was $2.1 billion, down from the
year-ago figure of $2.47 billion. The top line was also lower than
the Zacks Consensus Estimate by $295 million.
Residential electric sales were 3,052 million kilowatt Kwh while
Commercial & Industrial sales were 6,857 million Kwh in the
reported quarter. Total sales were 9,978 million Kwh.
Total operating expenses in the quarter under review were $1.67
billion, down 9.9% year over year. Lower operating expenses were
offset by a decline in revenue, resulting in an operating income of
$433 million, down 30.2% year over year.
Segment operating earnings were $110 million in the quarter, down
from $186 million in the prior-year period. The downside reflects
lower prices for energy and capacity.
Production from Power's combined cycle natural gas fleet was up 10%
year over year with a capacity factor of 57.0% versus 52% in the
year-ago quarter. Production from the nuclear fleet was down 3%
year over year with average capacity factor of 87.2% compared to an
average capacity factor of 90.3% in the year-ago quarter.
The segment generated operating earnings of $101 million, down 3.8%
year over year. The decline reflects warmer-than-normal winter
weather, an increase in operating and maintenance expense and
depreciation expense partially offset by an increase in
PSEG Energy Holdings:
Segment operating earnings were $4 million, down from the
prior-year figure of $10 million. The results reflect lower
earnings on leases.
At the end of June 30, 2012, long-term debt was $7.4 billion
compared with $7.06 billion at the end of December 31, 2011.
Commercial Paper and Loans were $0.016 billion versus no Commercial
Paper and Loans at the end of December 31, 2011.
Based on the operational focus and expanded capital program that
makes the company well positioned for the long term, the company
reaffirmed its earnings guidance. The company expects earnings per
share in the range of $2.25 to $2.50 for full-year 2012.
Though both the top- and bottom-line results trended down in the
reported quarter, missing our forecast, it was in line with
management's expectations. The results demonstrate the company's
effort to provide reliable service at a reasonable cost.
Going forward, the company's robust portfolio of regulated and
non-regulated utility assets offers a steady earnings base and
significant long-term growth prospects. Moreover, approval of the
$3.5 billion transmission investment program will improve the
system's reliability and will help to maintain the state's
commitment to renewable energy. The investment program also proves
that the company remains focused on operational excellence and
However, we remain concerned about the increasing cost of coal,
higher pension & financial costs, and power-price volatility.
The company presently retains a short-term Zacks #2 Rank (Buy). We
have a long-term Neutral recommendation on the stock.
One of the company's peers,
Xcel Energy Inc.
) is expected to release its earnings on August 2, 2012. The Zacks
Consensus Estimates for the second quarter and full year 2012 are
35 cents and $1.78, respectively.
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).