Pepco Holdings Inc.
) reported second quarter 2012 earnings from continuing operations
of 25 cents per share, much lower than the year-ago figure of 43
cents. The earnings were also lower than the Zacks Consensus
Estimate of 32 cents.
The year-over-year decline in earnings was due to higher
operating and maintenance expenses at Power Delivery services and
lower earnings at Pepco Energy Services.
Earnings per share, as per GAAP, were 27 cents versus 42 cents
in the second quarter of 2011. The difference between GAAP and
operating earnings during the reported quarter was due to a 3 cent
mark-to-market gain on hedging activities and a charge of 1 cent
due to impairment of assets.
Total revenue of the company at the end of the second quarter
was $1.18 billion, down 16.5% from $1.41 billion in the year-ago
period. The year-over-year decline was primarily due to lower
Pepco Energy Service
Power Delivery Services
Revenues also failed to match the Zacks Consensus Estimate of
Total operating expenses were $1.03 billion versus $1.21 billion
in the year-ago period. The decline stemmed from a 31.6%
decrease in fuel and purchase energy costs.
Lower expenses notwithstanding, operating income at Pepco
declined to $152 million in second quarter 2012 from $202 million
in the prior-year quarter. This was largely due to the weak
Interest expenses at second quarter end were $65 million versus
$63 million at the end of the year-earlier period.
Cash and cash equivalents, including restricted cash, were $48
million as of June 30, 2012, lower than $120 million as of December
Long-term debt of the company as of June 30, 2012 was $4,203
million versus $3,794 million as of December 31, 2011.
Pepco Holdings reiterated its 2012 earnings per share outlook in
the range of $1.15 to $1.30. The guidance excludes the impact of
discontinued operations and assumes normal weather during the
In the energy products and services niche, the company competes
). The latter posted second quarter 2012 net operating earnings of
23 cents per share compared with 17 cents in the prior-year
quarter. Quarterly earnings beat the Zacks Consensus Estimate of 20
Total revenue in the quarter under review declined 12.1% year
over year to $1,038.1 million from $1,181 million in the second
quarter of 2011. The year-over-year decline was due to
significantly lower revenues from the Gas Distribution segment,
which plummeted 42.3% year over year. Reported revenue missed the
Zacks Consensus Estimate of $1,165 million.
The company missed our expectation in the wake of poor
performance from both its operating segments. The rate case
decision in Maryland was also not very encouraging. Pepco is
scheduled to file for rate increases in Maryland in the fourth
quarter of 2012.
Looking ahead, we believe the violent storm, which occurred in
Pepco's service territories, will negatively impact its operating
results in the coming quarter.
Pepco Holdings currently retains a Zacks #3 Rank (short-term
Based in Washington, District of Columbia, Pepco Holdings,
through its two operating divisions, Power Delivery and Competitive
Energy, involves in transmission and distribution of electricity,
as well as delivery and supply of natural gas.
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