Energy holding company, SCANA Corp. SCG reported strong first-quarter 2015 results of $1.34 per share comfortably surpassing the Zacks Consensus Estimate of $1.20. The upside came from higher margins boosted by colder weather in the first quarter as well as customer growth and rate base hikes. However, it decreased from the year-ago figure of $1.37.
The company’s quarterly operating revenue decreased 12.6% year over year to $1,389.0 million and also came below the Zacks Consensus Estimate of $1,463.0 million.
Segment Performance
South Carolina Electric & Gas Company (SCE&G): Quarterly earnings from this segment, SCANA's principal subsidiary, were 89 cents per share, unchanged from the year-ago level. This was due to higher electricity margins, a Base Load Review Act rate increase and customer growth. This was partially offset by milder weather during the quarter.
As of Mar 31, 2015, natural gas and electric customers of SCE&G increased 2.9% and 1.5% from a year ago to 342,000 and 692,000, respectively.
PSNC Energy: This segment recorded earnings of 24 cents per share, flat year over year. As of Mar 31, 2015, PSNC Energy’s customer base widened 2.6% year over year to 525,000.
SCANA Energy-Georgia: The segment – comprising SCANA’s retail natural gas marketing business in Georgia – posted earnings of 19 cents per share, up 18.8% year over year.
Corporate and Other, Net: This business segment posted earnings of $1.48 per share compared with 8 cents in the year-ago period.
Guidance
SCANA affirmed its full-year 2015 earnings guidance of $3.60–$3.80 per share. The company targets average annual growth rate of 3–6% over the next three to five years.
Outlook
We expect SCANA to benefit from the new electric generation plants within its service territory and nuclear expansion projects, going forward. The company is a stable, relatively strong and regulated integrated electric utility, which is supported by favorable regional demographics and electric utility rate. However, we are apprehensive of the company’s sensitivity to changes in coal, gas, oil and other commodity prices. Construction costs and delays could affect the timing of rate base growth, earnings, cash flow and balance sheet quality.
SCANA currently carries a Zacks Rank #4 (Sell).
Better-ranked energy sector stocks such as Valero Energy Partners L.P. VLP, CNOOC Ltd. CEO and Hallador Energy Company HNRG sport a Zacks Rank #1 (Strong Buy).
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