Public Service Enterprise Group Inc. PEG or PSEG reported second-quarter 2015 operating earnings of 57 cents per share, surpassing the Zacks Consensus Estimate of 54 cents by 5.6%. Quarterly earnings exceeded the year-ago figure of 49 cents by 16.3%.
The earnings beat reflects investments made by the company in its electric and gas distribution and transmission system.
On a GAAP basis, quarterly earnings were 68 cents per share compared with 42 cents per share a year ago.
Total Revenue
Revenues of $2,314 million in the reported quarter beat the Zacks Consensus Estimate of $2,267 million by 2.1% and increased 2.9% from the year-ago figure of $2,249 million.
Electric sales volume increased 2.5% year over year to 9,865 million kilowatt-hours, while gas sales volume decreased 9.8% to 830 million therms.
Electricity sales were driven by 6.5% growth in residential and 0.7% in the commercial and industrial sector. Total gas sales in the reported quarter declined from the prior-year period due to a reduction in non-firm sales volume of gas comprising the commercial & industrial sector.
Highlights of the Release
Operating income increased 55.6% year over year to $568 million in the quarter. Total operating expenses were $1,746 million, down 7.3% year over year. The decrease in total expenses was due to a 15.3% fall in energy costs and a 4.9% decline in operation and maintenance expenses.
Interest expenses in the reported quarter were $97 million compared with $94 million a year ago.
Segment Performance
PSE&G: Segment operating earnings were $167 million, up 10.6% from $151 million in the prior-year period. The upside was due to an expansion of its capital program and the impact of warmer-than-normal temperatures on demand.
PSEG Power: The segment generated operating earnings of $110 million, up 26.4% year over year. The increase reflects improved operating performance at its nuclear and fossil generating units, higher prices of its hedged energy output accompanied with a decline in the cost of its gas supply.
PSEG Enterprise/Other: The segment generated operating earnings of $12 million compared with $7 million in the prior-year quarter. Higher PSEG Long Island earnings, lower expenses and higher interest income at Parent benefited the quarterly results.
Financial Update
As of Jun 30, 2015, cash and cash equivalents were $597 million compared with $402 million as of Dec 31, 2014.
Long-term debt as of Jun 30, 2015, was $9.2 billion, up from the 2014 end level of $8.9 billion.
Public Service Enterprise Group generated $2,234 million in cash from operations during the first half of 2015, up 54.3% year over year.
2015 Guidance
The company has lifted the low end of its 2015 earnings guidance to the range of $2.80–$2.95 per share from $2.75–$2.95 per share earlier based on the solid first-half performance.
PSE&G’s operating earnings are expected in the range of $760–$775 million.
PSEG Power's operating earnings are expected in the $620–$680 million range.
PSEG Enterprise/Other’s operating earnings are expected to remain in the $40–$45 million band.
Other Utility Releases
PG&E Corporation’s PCG adjusted operating earnings per share of 91 cents in the second quarter of 2015 outpaced the Zacks Consensus Estimate of 77 cents by 18.2%. The reported figure also surged 31.9% from the year-ago earnings.
CMS Energy Corp. CMS reported second-quarter 2015 adjusted earnings per share of 25 cents, missing the Zacks Consensus Estimate of 33 cents by 24.2%. Quarterly earnings also declined 16.7% from the year-ago figure primarily due to lower revenues.
American Electric Power Co., Inc. AEP reported second-quarter 2015 operating earnings of 88 cents per share, beating the Zacks Consensus Estimate of 81 cents by 8.6%.
Our View
Public Service Enterprise has a strong portfolio of regulated and non-regulated assets, which provides stability to its earnings. The slow but ongoing improvement in economic conditions in its service territories is having a positive impact on demand.
Investments made by the company to strengthen its operations enabled its power fleet to perform impressively during the first half of 2015. These initiatives are helping the company to serve its customers efficiently, generating operational improvements at PSEG Power.
Public Service Enterprise Group currently holds a Zacks Rank #3 (Hold).
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