American Electric Power Company Inc. (AEP) reported third-quarter 2014 operating earnings of $1.01 per share, missing the Zacks Consensus Estimate of $1.03 by 1.9%. The quarterly figure also moved downward from the year-ago profit of $1.10 per share by 8.2%. The weak performance was due to the mild summer. The company’s plan to speed up spending and shift costs from future years into 2014 also negatively affected the quarterly results.
On a GAAP basis, the utility’s third quarter 2014 earnings were on par with the operating number. In the year-ago quarter, GAAP earnings were 89 cents per share taking into account a one-time charge of 21 cents.
Total Revenue
American Electric Power’s third-quarter operating revenues were $4.3 billion, short of the Zacks Consensus Estimate of $4.6 billion by 6.2% and lower than the year-ago number of $4.2 billion by 3%.
Operational Update
Fuel & Other Consumables used for electric generation stood at $1.1 billion in the quarter, down 7.5% from $1.2 billion a year ago.
Total expenses in the reported quarter were $1.8 billion, up 14.4% year over year from $1.6 billion.
Segmental Performance
Vertically Integrated Utility Operations: Operating earnings in the quarter decreased $54 million or 19.8% year over year to $219 million. The downslide was due to the adverse impact of shifting costs from future years for plant maintenance and forestry expenses. The impact of cooler temperatures across most of AEP's service territory also impacted the segment results.
Transmission & Distribution Operations: Operating earnings dropped 22.7% year over year to $92 million in the quarter.
AEP Transmission Holdco: This unit generated operating income of $43 million during the quarter compared with $22 million in the third quarter 2013, backed by increased transmission investment.
Generation and Marketing: Operating earnings were $117 million, up 4.5% from $112 million in the third quarter 2013. The improvement reflects improved margins.
AEP River Operations: This segment registered an operating income of $11 million as against a loss of $1 million a year ago. This reflects improvements in barge freight demand.
All Other: The segment generated earnings of $11 million in the reported quarter compared with $8 million a year ago.
Financial Condition
American Electric Power’s cash and cash equivalents as of Sep 30, 2014 were $194 million compared with $118 million as of Dec 31, 2013.
Long-term debt was $15.6 billion as of Sep 30, 2014 compared with $16.8 billion as of Dec 31, 2013.
American Electric Power’s cash flow from operating activities in the first nine months of 2014 stood at $3.7 billion compared with $3.0 billion in the same period last year.
Recently, American Electric Power raised its quarterly cash dividend by 6% to 53 cents from the previous payout of 50 cents. It gives out dividends to its shareholders on a quarterly basis and hikes the dividend rate at regular intervals in an effort to maximize shareholder value.
Guidance
American Electric Power, one of the largest electric utilities in the U.S., narrowed its 2014 operating earnings guidance to $3.40−$3.50 per share from $3.35–$3.55 per share earlier.
Earlier, the company had issued an operating earnings guidance in the range of $3.30–$3.60 per share for 2015 and $3.45–$3.85 per share for 2016.
Peer Release
CMS Energy Corporation (CMS) reported third-quarter 2014 earnings per share of 37 cents on an adjusted basis. Quarterly earnings lagged the Zacks Consensus Estimate of 42 cents by 11.9% and the year-ago number of 48 cents by 22.9%.
Consolidated Edison, Inc. (ED) is expected to release its third-quarter results on Nov 6, 2014. The Zacks Consensus Estimate for the quarter is $1.43 per share.
Duke Energy Corp. (DUK) is slated to report its third-quarter results on Nov 5, 2014. The Zacks Consensus Estimate for the quarter is $1.52 per share.
Our Take
Although American Electric delivered lower-than-expected results due to mild summer temperatures, its ongoing investments in transmission projects and in regulated as well as non-regulated businesses are set to drive its earnings in the future.
In addition, economic improvement in its service territories – mainly in areas with shale gas development – is encouraging. Overall industrial sales increased 5% in the third quarter. This marks the fourth consecutive quarter of positive industrial sales growth. Commercial sales also improved but marginally for the fifth consecutive quarter; residential usage however declined this quarter.
American Electric Power current holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment