Pepco Holdings Misses Q2 Earnings, Up Y/Y - Analyst Blog

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Pepco Holdings Inc. ( POM ) reported second quarter 2013 earnings from continuing operations of 22 cents per share, 2 cents lower than the Zacks Consensus Estimate. However, earnings were 10% higher than the year-ago number of 20 cents.

The year-over-year increase in operating earnings was primarily due to a rise in electric distribution revenue and lower operation and maintenance expenses partially offset by a decline in electric supply margins and lower unbilled revenue related to Atlantic City Electric basic generation service.

GAAP earnings were 16 cents per share versus 23 cents in the second quarter of 2012. The difference between GAAP and operating earnings during the reported quarter was due to a 2 cent charge from cross-border energy lease including related interest expense on uncertain tax positions and a charge of 4 cents related to cross-border energy lease net loss on early terminations.


Total Revenue

Pepco Holdings'  total revenue at the end of the second quarter was $1.05 billion, down marginally from $1.07 billion in the year-ago period. Quarterly revenue also fell short of the Zacks Consensus Estimate of $1.4 billion by 22.5%.

The year-over-year decline was primarily due to lower top-line contribution from Pepco Energy Services partially offset by increased returns from Power delivery services.

Highlights of the Release

In the second quarter, Pepco Holdings'  total electric sales, at Power Delivery, plummeted 2.3% to 11,172 gigawatt hours (GWh). The mild weather in its service territories impacted the demand for electricity.

Total operating expenses at the end of the quarter declined marginally to $921 million from $933 million in the comparable year-ago period.

Pepco Holdings' installations as well as activation of smart meters in the District of Columbia and Maryland service zones were nearly completed. Installation and activation tasks of smart meters by Delmarva Power was concluded in its Delaware electric service territory while work is currently progressing in the Maryland service areas.

Financial Update

Pepco Holdings' cash and cash equivalents, including restricted cash, were $35.0 million as of Jun 30, 2013, flat with the cash balance as of Dec 31, 2012. Long-term debts as of Jun 30, 2013 were $3.8 billion, up 4.5% from $3.6 billion as of Dec 31, 2012.

Guidance

Pepco Holdings reiterated its 2013 earnings outlook in the range of $1.05 to $1.20 per share. The guidance assumes normal weather during the year.

Other Company Releases

Exelon Corporation ( EXC ) reported earnings of 53 cents per share in the second quarter of 2013, missing the Zacks Consensus Estimate by a penny.

NiSource Inc. ( NI ) announced second-quarter 2013 operating earnings of 23 cents per share, 4.2% below the Zacks Consensus Estimate.

Public Service Enterprise Group Inc. ( PEG ) reported second quarter 2013 earnings of 48 cents per share, surpassing the Zacks Consensus Estimate by 4.3%.

Our View

Pepco Holdings presented favorable year over year earnings results in the reported quarter backed by effective cost control initiatives and acceleration in distribution operations though the mild weather proved to be a deterrent.

Going forward, the company's aggressive investments in modernizing its utility infrastructure will act as a key growth catalyst and will help retain its customer base. Moreover, prudent capital outlay and continued implementation of cost-containment measures will bode well for Pepco Holdings' future development plans.

However, the discouraging distribution rate base outcomes might hurt the company's margins. Pepco Holdings currently retains a Zacks Rank #3 (Hold).



EXELON CORP (EXC): Free Stock Analysis Report

NISOURCE INC (NI): Free Stock Analysis Report

PUBLIC SV ENTRP (PEG): Free Stock Analysis Report

PEPCO HLDGS (POM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: EXC , NI , PEG , POM

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