American Electric Power Company Inc. (AEP) posted second-quarter 2013 pro forma earnings per share of 73 cents, missing both the Zacks Consensus Estimate as well as the year-ago result by 4 cents. The decline in earnings was primarily due to decrease in residential, commercial and industrial sales, and rise in fuel costs for electricity generation.
On a GAAP basis, American Electric Power registered earnings of 69 cents per share versus 75 cents per share a year ago. The difference between GAAP and pro forma earnings was due to an impairment charge of 20 cents for the expected retirement of Muskingum River Plant Unit 5 and a gain of 16 cents related to United Kingdom windfall tax credit.
Operational Performance
American Electric Power’s quarterly revenue was $3,582 million, missing the Zacks Consensus Estimate by $56 million. However, revenues increased by 0.9% year over year due to strong contribution from the Transmission Operations and Generation and Marketing segments.
Segmental Performance
Utility Operations: Operating earnings decreased 14% year over year to $320 million. This was primarily due to cooler weather, negative impacts related to the higher competition in Ohio, and decline in capacity payments in the PJM Interconnection.
Transmission Operations: Operating earnings was $18 million, up 125% year over year due to an increase in transmission investment.
AEP River Operations: This segment registered operating loss of $9 million versus operating earnings of $3 million a year ago. The company’s quarterly performance decreased due to a decline in coal and grain exports.
Generation and Marketing: Operating earnings was $4 million versus an operating loss of $5 million. Improvement in earnings was due to increase in trading and marketing margins.
All Other: Operating earnings increased to $24 million from a loss of $8 million driven by increased interest income related to a favorable court decision for the United Kingdom windfall profit taxes.
Financial Condition
American Electric Power’s cash and cash equivalents as of Jun 30, 2013 was $117 million versus $279 as of Dec 31, 2012.
Long-term debt was $15.8 billion as of Jun 30, 2013 versus $15.6 billion as of Dec 31, 2012.
American Electric Power’s cash flow from operating activities during the first six months of 2013 was $1.5 billion compared with $1.7 billion in the year-ago comparable period.
Guidance
American Electric Power maintained its full-year 2013 operating earnings guidance in the range of $3.05 to $3.25 per share.
Zacks Rank
American Electric Power currently has a Zacks Rank #3 (Hold). However, other stocks in the industry that are worth considering are Companhia Paranaense de Energia (ELP) and Integrys Energy Group, Inc. (TEG) with a Zacks Rank #1 (Strong Buy), and Calpine Corporation (CPN) with a Zacks Rank #2 (Buy).
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