Dominion Resources Inc. (D) reported fourth-quarter 2014 operating earnings of 84 cents per share, lagging the Zacks Consensus Estimate by a penny or by 1.2%.
Earnings were ahead the year-ago figure of 80 cents by 5% and were within the guidance range of 80 cents to 90 cents for the quarter. GAAP earnings were 42 cents per share compared with 74 cents per share in the year-ago quarter. The difference between GAAP and operating earnings in the reported quarter was due to the charge associated with the North Anna power station and offshore wind facilities, charges associated with liability management, future ash pond closure expenses and some other one-time items.
2014 operating earnings were $3.43 per share, up 5.5% from 2013 earnings of $3.25 per share. The year-over-year improvement was due to higher contribution from its regulated gas and electric businesses, earnings from Marcellus farmouts, higher merchant generation margins, and benefits from investment tax credits.
Total Revenue
Dominion’s operating revenue of $2.97 billion in the fourth quarter missed the Zacks Consensus Estimate of $3.03 billion by 2.02%. The fourth quarter revenue also decreased nearly 8.1% year over year.
The decline in the top line was primarily due to lower contribution from Dominion Generation, marginally offset by a stronger Dominion Virginia Power and Dominion Energy.
2014 total revenue of $12.46 billion was also lower than the prior year revenue of $13.1 billion by 4.9%.
Segment Update
Dominion Virginia Power recorded net income of $136 million or 23 cents per share in the fourth quarter of 2014, up 4.5% year over year.
Dominion Energy recorded earnings of $195 million or 34 cents per share, up 14% year over year.
Dominion Generation’s earnings were $307 million or 52 cents per share, up 21.8% year over year.
Corporate and Others incurred a loss of 25 cents per share, much wider than the year-ago loss of 14 cents.
Highlights of the Release
Total operating expenses in the quarter decreased 9.7% year over year to $2.14 billion. The decline in total expenses was primarily due to a 27.5% and 13.8% respective drop in energy fuel and other energy related purchases and purchased gas prices.
Interest and related charges in the reported quarter were $217 million compared with $226 million in the year-ago quarter.
Dominion Virginia Power recorded a decline in electricity sales volume in the reported quarter despite a 1% increase in its customer base. Total electricity delivered by Virginia Power in the reported quarter declined 0.5% year over year to 19,898Gwh.
Financial Update
Dominion exited 2014 with cash and cash equivalents of $331 million, up from $316 million as of Dec 31 2013.
Long-term debt at year end increased to $21.8 billion from $19.33 billion at the prior-year end.
Cash from operating activities in 2014 was $3.45 billion, up marginally from $3.43 billion in the comparable year-ago period.
Looking Ahead
Dominion expects to generate first-quarter 2015 operating earnings in a range of 85 cents to $1.00 per share.
The first-quarter results are likely to benefit from higher revenues from growth projects and merchant generation margins. However, earnings are expected to be lower than the prior-year quarter, primarily due to more normal weather, absence of an asset drop-down into its Blue Racer joint venture and higher operating and depreciation expenses.
Other Company Releases
American Electric Power Co., Inc.’s (AEP) earnings per share of 48 cents in the fourth quarter 2014 lagged the Zacks Consensus Estimate of 52 cents by 7.7%.
CMS Energy Corporation (CMS) reported fourth-quarter earnings of 35 cents per share, missing the Zacks Consensus Estimate of 36 cents by 2.8%
Xcel Energy Inc. (XEL) reported fourth-quarter 2014 operating earnings per share of 39 cents, short of the Zacks Consensus Estimate of 34 cents by 14.7%.
Our View
Dominion Resources is working on its plan to improve its infrastructure and expand renewable power generation capacity. Last year the company received regulatory approval and began construction on the Cove Point liquefaction project. This project once completed will boost the performance of the company.
Dominion’s focus to add natural gas and renewable power generation assets to its portfolio is appreciable given the increasingly stringent regulations to lower carbon emission from electricity generation.
Dominion Resources holds a Zacks Rank #3 (Hold).
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