Pepco Holdings Inc.
) reported fourth quarter 2012 earnings from continuing
operations of 19 cents per share, surpassing the year-ago
figure of 15 cents by 26.7% but missing the Zacks Consensus
Estimate of 20 cents by a penny.
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The year-over-year increase in operating earnings was primarily
due to higher electric transmission and distribution revenue
partially offset by lower Pepco Energy Services earnings.
Earnings per share, as per GAAP, were 18 cents versus 10 cents in
the fourth quarter of 2011. The difference between GAAP and
operating earnings during the reported quarter was due to a gain
of 1 cent mark-to-market from hedging activities and a 2 cent
impairment charge related to Pepco Energy Services' long-lived
Pepco Holdings' 2012 operating earnings were $1.21 per share,
down 3.2% from $1.25 reported in 2011. Earnings were in line with
the Zacks Consensus Estimate.
The annual decline was due to lower earnings from Pepco Energy
Services, lower default electricity supply margins and higher
GAAP earnings per share in 2012 were $1.24 versus $1.15 in 2011.
The difference between GAAP and operating earnings for 2012 was
due to the impact of a few one-time items, comprising an 8 cent
mark-to-market gain on hedging activities and a 3 cent impairment
charge related to Pepco Energy Services' long-lived assets.
Total revenue at the end of the fourth quarter was $1.13 billion,
down 9.5% from $1.25 billion in the year-ago period. Quarterly
revenue also fell short of the Zacks Consensus Estimate of $1.29
billion by 12.6%.
The year-over-year decline was primarily due to lower
contribution from Pepco Energy Services which declined 55.3% on a
year-over-year basis. This was offset partially by better
performance from Power Delivery which grew 2.6% and a 20%
improvement in the Other segment.
Total 2012 revenue of $5.1 billion missed the Zacks Consensus
Estimate of $5.54 billion.
In 2012, total regulated transmission & distribution electric
sales, at Power Delivery, dipped 2.3% to 48,142 gigawatt hours
(GWh). The downside was due to the erratic weather pattern, which
impacted demand. Weather adjusted electric sales were 48,182 GWh
in 2012, compared with 48,785 GWh in 2011.
Total operating expenses at the end of the quarter and at 2012
end declined by 12.3% and 16.9%, respectively, from the
comparable year-ago period. The majority of the savings in
expenses came from lower fuel and energy costs.
Despite a decline in revenue at the end of the quarter and also
in 2012, the lower operating cost boosted the operating income of
the company. Operating income in fourth quarter 2012 was $115
million versus $91 million in fourth quarter 2011. Operating
income was $670 million in 2012, rising marginally from $637
million reported in 2011.
Cash and cash equivalents, including restricted cash, were $35
million as of Dec 31, 2012, down from $120 million as of Dec 31,
Long-term debts as of Dec 31, 2012 were $3,648 million, down 3.8%
from $3,794 million as of Dec 31, 2011.
Pepco Holdings estimates 2013 earnings in the range of $1.05 to
$1.20 per share, lower than 2012 levels. The guidance excludes
the impact of discontinued operations and assumes normal weather
during the year.
Other Company Release
Pike Electric Corporation
) reported earnings of 67 cents per share in the second quarter
of fiscal 2013, widely surpassing the Zacks Consensus Estimate of
Otter Tail Corporation
) announced fourth-quarter 2012 operating earnings of 47 cents
per share, 56.7% above the Zacks Consensus Estimate of 30 cents.
Public Service Enterprise Group Inc.
) reported fourth quarter 2012 earnings of 41 cents per share, up
5.1% from the Zacks Consensus Estimate.
Pepco Holdings reported lower-than-expected results primarily due
to lower retail energy supply and a challenging energy services
The outcome of some pending rate cases in 2012 disappointed Pepco
Holdings' expectation. Pepco Holdings still has a few pending
rate cases and, since the outcome of the same is uncertain,
visibility on 2013 performance is low.
The company decided to invest $5.9 billion in the electric system
over the next five years to better serve its customers. However,
if the company fails to recover the same through constructive
regulatory outcomes, future growth investment of the company
might be jeopardized.
Based in Washington, DC, Pepco Holdings, through its two
operating divisions -- Power Delivery and Competitive Energy --
is engaged in the transmission and distribution of electricity,
as well as delivery and supply of natural gas. Pepco
Holdings currently retains a Zacks Rank #4 (Sell).