Pepco Holdings Earnings In Line, Revs Lag
Pepco Holdings Inc. (POM) reported third quarter 2013 net earnings of 44 cents per share, in line with the Zacks Consensus Estimate. However, earnings were 16% higher than the year-ago earnings of 38 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. The upside was limited by lower weather-related sales in its service territories.
Total Revenue
Pepco Holdings' total revenue in the third quarter was $1.344 billion, down 3.2% from $1.389 billion in the year-ago period. Quarterly revenue also fell short of the Zacks Consensus Estimate of $1.815 billion.
The year-over-year decline was primarily due to lower top-line contribution from Power Delivery services as well as Pepco Energy Services.
Highlights of the Release
In the third quarter, Pepco Holdings' total electric sales at Power Delivery, was down 7.2% to 13,335 gigawatt hours (GWh). The mild weather in its service territories impacted the demand for electricity.
Total operating expenses in the quarter declined 6.6% to $1.11 billion from $1.19 billion in the comparable year-ago period.
As of Sep 30, 2013, Delmarva Power’s installations as well as activation of smart meters has been completed in its Delaware service territory but is ongoing in its Maryland service territory. Pepco Holdings’ installations as well as activation of smart meters in the District of Columbia and Maryland service zones stand nearly completed.
Financial Update
Pepco Holdings' cash and cash equivalents, including restricted cash, were $73 million as of Sep 30, 2013, up significantly from $35 million as of Dec 31, 2012. Long-term debts as of Sep 30, 2013 were $3.8 billion, up 4.3% from $3.6 billion as of Dec 31, 2012.
Guidance
Pepco Holdings narrowed its 2013 earnings outlook to the range of $1.08 to $1.18 per share from $1.05 to $1.20 per share. The guidance assumes normal weather during the fourth quarter.
Other Company Releases
Exelon Corporation (EXC) reported third-quarter 2013 pro forma earnings of 78 cents per share, surpassing the Zacks Consensus Estimate by 12 cents. Quarterly earnings edged up 1.3% year over year.
NiSource Inc.’s (NI) operating earnings from continuing operation of 18 cents per share in the third quarter of 2013 were in line with the Zacks Consensus Estimate. Earnings however jumped considerably from the year-ago profit level of 4 cents.
Public Service Enterprise Group Inc. (PEG) reported third quarter 2013 earnings of 76 cents per share, in line with the Zacks Consensus Estimate. Earnings were up 1.33% year over year.
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 towards modernizing its utility infrastructure will act as a key growth catalyst and will help retain its customer base. The company stated to spend about $5.8 billion over the next five years to replace aging infrastructure and installing advanced technologies.
Moreover, prudent capital outlay and continued implementation of cost-containment measures will bode well for Pepco Holdings’ future development plans.
Pepco Holdings currently retains a Zacks Rank #4 (Sell).
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