Dominion Resources Inc. (D) reported third quarter 2013 operating earnings of $1.00 per share, 9.9% higher than the Zacks Consensus Estimate of 91 cents.
Earnings also surpassed the year-ago figure of 92 cents by 8.7%. In fact, the company also sailed past the expected guidance range of 85 to 95 cents for the quarter. The strong performance came on the back of lower operating and maintenance expenses.
GAAP earnings were 98 cents versus 36 cents in the year-ago quarter. The difference between GAAP and operating earnings in the reported quarter was due to a one-time impact of 2 cents from discontinued operations, impairment of certain natural gas infrastructure assets and other small one-time charges.
Operational Update
Dominion’s operating revenue of $3.43 billion in the third quarter increased 3% year over year. The improvement in the top line was primarily due to higher contribution from Dominion Energy and Dominion Generation, marginally offset by lower contribution from Dominion Virginia Power.
Total revenue also came ahead of the Zacks Consensus Estimate of $3.17 billion by 7.9%.
Segment Update
Dominion Virginia Power recorded revenue of $837 million in the third quarter of 2013, down 0.6% year over year.
Dominion Energy reported revenue of $642 million, up 12.3% year over year.
Dominion Generation’s revenue increased 3.1% year over year to $1.99 billion.
Operational Update
Total operating expenses in the third quarter increased 2.9% year over year to $2.36 billion. The increase was due to higher electric fuel and other energy related purchases, purchased electric capacity and purchased gas. This was marginally offset by an 18.3% decline in operations and maintenance expenses.
However, total operating expenses in the reported quarter contracted 200 basis points as a percentage of total revenue. This boosted the operating income of the company, which increased 8.9% year over year to $1.07 billion.
Interest and related charges in the reported quarter were $0.21 billion versus $0.19 billion in the year-ago quarter.
Financial Update
Dominion exited the quarter with cash and cash equivalents of $287 million, up from $248 million as of Dec 31 2012.
Long-term debt at quarter end increased to $18.54 billion from $16.85 billion at prior-year end.
Cash from operating activities in the first nine months of 2013 decreased to $2.95 billion from $3.46 billion in the year-ago period.
Looking Ahead
Dominion expects to deliver fourth quarter operating earnings in a range of 85 cents to 95 cents per share. The fourth quarter results are likely to benefit from lower operations and maintenance expenses, higher rate adjustment clause revenues and anticipated growth in its electric service territory.
Dominion affirmed full year 2013 operating earnings in a band of $3.20–$3.50 per share.
Other Company Releases
American Electric Power Co., Inc.’s (AEP) earnings per share of $1.10 in the third quarter 2013 surpassed the Zacks Consensus Estimate of $1.08 by 1.85%.
NiSource Inc.’s (NI) earnings per share of 18 cents in the third quarter were in line with the Zacks Consensus Estimate.
Edison International (EIX) reported third-quarter 2013 operating earnings of $1.46 per share, up 20.7% from the Zacks Consensus Estimate of $1.21.
Our View
The approval from the U.S. Department of Energy for natural gas exports to non-Free Trade Agreement countries was an important development in the reported quarter. Dominion expects to export gas from its Cove Point LNG facility from 2017 onwards. We believe this will definitely benefit the company over the long run, given the increasing emphasis on the usage of natural gas on a global scale.
Despite the better-than-expected third quarter results, Dominion has missed earnings estimates in the first half of the year. The company holds a Zacks Rank #4 Rank (Sell). With a market cap of $37.05 billion, the company employs 15,500 individuals.
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