Consolidated Edison Inc. (ED), also known as ConEd, announced third quarter fiscal 2011 results with pro forma earnings per share (EPS) of $1.33, in line with the Zacks Consensus Estimate. However, EPS exceeded the year-ago figure by a penny.
The results were driven by performance of ConEd's utility and competitive energy businesses, and effective cost management strategies. It also reflects changes in rate plans of ConEd's utility subsidiaries. The incremental revenues from revised rate plans helped offset the increase in certain operations and maintenance expenses, and depreciation and property taxes.
On a GAAP basis, the company reported an EPS of $1.31 as compared to an EPS of $1.24 in the prior-year quarter. This includes net mark-to-market effects of the competitive energy businesses of 2 cents.
Operational Results
ConEd reported operating revenue of $3.6 billion, missing the Zacks Consensus Estimate by $349 million. It also fell short of $3.7 billion in the prior year.
Of total revenue, Electric revenues went up $47 million to $2.9 billion and gas revenues declined $9 million to $220 million. Revenues from steam were $76 million compared with $91 million a year ago and non-utility revenues were down by $101 million to $472 million.
During the quarter, total operating expenses were $2.9 billion, down $129 million year over year. Other operations and maintenance expenses incurred were up $45 million to $783 million due to higher costs for pension and other postretirement benefits and employee health insurance, partially offset by savings from cost control efforts.
The company generated operating income of $756 million compared with $705 million in the prior-year period. Pro forma net income in the quarter was $390 million compared with $372 million in the year-ago period.
Financial Condition
ConEd ended the quarter with cash and temporary cash investments of $398 million, compared with $338 million of cash at the end of fiscal 2010. Long-term debt of $10.4 billion was lower than the fiscal 2010 figure of $10.7 billion.
Outlook
For fiscal-year 2011, the company narrowed its EPS guidance to a range of $3.55 to $3.65 versus its previous expectation of $3.45 to $3.65.
Peer Comparison
Recently, one of ConEd’s peer, American Electric Power Co. Inc. (AEP) reported third quarter 2011 adjusted EPS of $1.17, beating the year-ago figure of $1.15 and the Zacks Consensus Estimate of $1.14.
Our Take
Consolidated Edison has a stable earnings base from its two regulated utilities. Going forward, the growth momentum will depend on positive investment factors, such as favorable regulatory decisions, higher electricity rates in New York, revenue insulation from demand volatility and infrastructure improvement programs. The company also continues to deploy Smart Grid technologies and energy efficiency programs. These efforts will enhance system performance and provide energy savings for businesses and residential customers.
However, the valuation continues to be restrained by the expected lower demand for electricity, earnings dilutive issuances and regulatory risks. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
New York City-based Consolidated Edison, Inc. is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. ConEd’s regulated businesses operate through two subsidiaries — Consolidated Edison Company of New York (CECONY) and Orange and Rockland Utilities (O&R).
AMER ELEC PWR (AEP): Free Stock Analysis Report
CONSOL EDISON (ED): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment