Pepco Holdings Inc
) reported third quarter 2012 earnings from continuing operations
of 47 cents per share, higher than the year-ago figure of 36
cents. Earnings were also higher than the Zacks Consensus
Estimate of 42 cents.
The year-over-year growth in earnings was due to higher electric
transmission and distribution revenue, lower expenses and early
termination of one of the seven cross-border lease investments
leading to an after-tax gain of $9 million.
Earnings per share, as per GAAP, were 49 cents versus 35 cents in
the third quarter of 2011. The difference between GAAP and
operating earnings during the reported quarter was due to a 2
cent mark-to-market gain on hedging activities.
Total revenue at the end of the third quarter was $1.48 billion,
down 10.4% from $1.64 billion in the year-ago period. The
year-over-year decline was primarily due to lower contribution
from the Pepco Energy Service segment.
Revenues also failed to match the Zacks Consensus Estimate of
Total operating expenses were $1.21 billion versus $1.45 billion
in the year-ago period. The decline stemmed from a 25.2%
decrease in fuel and purchase energy costs.
Despite a 10.4% fall in total revenue in the reported quarter,
savings on the cost front boosted the margins of the company.
Operating income at Pepco increased to $264 million in third
quarter 2012 from $195 million in the prior-year quarter
Interest expenses at third quarter end were $68 million versus
$64 million at the end of the year-earlier period.
Cash and cash equivalents, including restricted cash, were $128
million as of September 30, 2012, up from $120 million as of
December 31, 2011.
Long-term debts as of September 30, 2012 were $4,100 million
versus $3,794 million as of December 31, 2011.
Pepco Holdings trimmed the top end of its earnings guidance for
2012. The new expectation for the full year 2012 is in the range
of $1.15 to $1.25 per share, down from an earlier range of $1.15
to $1.30 per share. The guidance excludes the impact of
discontinued operations and assumes normal weather during the
year. It also excludes restoration cost following Hurricane
Another company operating in the same niche is
). The company posted third-quarter 2012 pro forma earnings per
share of 5 cents, beating the Zacks Consensus Estimate by a
penny. Quarterly earnings were lower than the year-ago figure of
11 cents per share due to increase in operating as well as
Total revenue in the quarter under review declined to $961.9
million from $1,023.8 million in the year-ago quarter. Reported
revenue lagged the Zacks Consensus Estimate of $1,076.0 million.
The company has been impacted by storms twice during the year and
intends to recover system restoration costs through distribution
rate base cases. We believe the restoration costs will to an
extent impact the operating results of the company.
Pepco's decision to spend $5.9 billion in the course of next five
years to improve its operation, by improving system reliability,
enhancing customer service, and installing advanced technologies,
In the near term we do not locate any positive catalyst which can
benefit the results significantly. Besides, there is always a
degree of uncertainty involved in the outcomes of the rate cases.
Given these factors, the stock currently retains a short-term
Zacks #3 Rank (Hold rating).
Based in Washington, District of Columbia, Pepco Holdings,
through its two operating divisions, Power Delivery and
Competitive Energy, engages in transmission and distribution of
electricity, as well as delivery and supply of natural gas.
With a market capitalization of $4.49 billion, the company has
5,104 full time employees.
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