Before the bell, Constellation Energy Group Inc. (CEG) reported its third quarter 2011 results. In the reported quarter, the company's adjusted earnings per share of 68 cents came in below the Zacks Consensus Estimate of 89 cents. However, results were ahead of the year-ago earnings of 48 cents.
On a reported basis, including one-time items, earnings per share came in at 36 cents per share versus a loss per share of $6.99 in the year-ago quarter.
In the reported quarter the variance between reported and adjusted earnings was 32 cents per share — 15 cents were due to the amortized economic value of Constellation Energy Nuclear Group, LLC (CENG) joint venture power purchase agreement. Another 13 cents were due to the amortization of Constellation Energy Nuclear Group, LLC joint venture basis difference.
The other 3-cent differential was due to costs incurred in connection with the pending merger with Exelon Corporation (EXC). Earlier in April 2011, the two companies signed a definitive agreement to combine the two companies in a stock-for-stock transaction. The resulting company will retain the Exelon name and be based in Chicago.
Also the credit facility amendment fees incurred in connection with the 2009 stake sale of Constellation Energy Nuclear Group, LLC to Électricité de France (EDF) Group transaction resulted in a differential of a penny per share.
Operational Results
Constellation Energy's quarterly revenues of $3.52 billion were way behind the Zacks Consensus Estimate of $4.50 billion and the year-ago quarterly revenue of $3.97 billion.
Non-regulated revenues fell $314.30 million year over year to approximately $2.80 billion, regulated electric revenues decreased $137.70 million to $638.60 million while regulated gas revenues rose $4.20 million to $81.9 million. Overall net income came at $73.7 million versus a loss of $1.41 billion in the year-ago period.
Quarterly Segment Results
Baltimore Gas and Electric Company (BGE) overseeing the company’s regulated business reported break-even adjusted earnings, down from adjusted earnings of 14 cents per share in third quarter 2010. The year-over-year variance is primarily due to costs associated with restoring power following Hurricane Irene.
The Generation segment reported adjusted earnings of 44 cents per share, up from 41 cents in the year-ago quarter. The increase is largely attributable to higher earnings contribution from New England assets. This was partially offset by lower power prices and increased outage days at Constellation Energy Nuclear Group (CENG).
NewEnergy segment reported adjusted earnings of 23 cents per share versus an adjusted loss of 7 cents in the year-ago quarter. The year-over-year variance is due partially to the 20-cent per share loss in the third quarter of 2010 from legacy UK coal and freight business.
Financial Condition
Constellation Energy reported approximately $1.17 billion of cash and cash equivalents at the end of the reported period, compared to $2.03 billion at fiscal-end 2010. Long-term debt (net of current portion) was $4.15 billion, compared to $4.05 billion at fiscal-end 2010.
Outlook
Based in Baltimore, Maryland, Constellation Energy supplies energy products and services in North America. The company reaffirmed its fiscal 2011 earnings guidance range of $3.05–$3.35 per share.
In the near-term we are maintaining our Zacks #4 Rank (short-term Sell rating) on the stock. This implies that the stock is expected to Underperform with the broader U.S. equity market over the next 1–3 months. We are Neutral on Constellation Energy in the long-term.
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