Diversified energy company FirstEnergy Corp. FE reported first-quarter 2015 operating earnings of 62 cents per share, outpacing the Zacks Consensus Estimate by a dime. Earnings improved 59% year over year.
The improvement was prompted by higher earnings at Regulated Transmission. The quarter benefitted from transmission investments, a cooler weather and a conservative competitive strategy.
Including one-time items of negative 9 cents, FirstEnergy’s GAAP earnings came at 53 cents per share, up 8.2% year over year.
Total Revenue
FirstEnergy generated total revenues of $3.898 billion in the first quarter of 2015, beating the Zacks Consensus Estimate of $3.159 billion. Revenues however declined 6.8% year over year.
Though the regulated distribution and transmission business benefited the top line, the competitive energy services segment was a laggard.
Highlights of the Release
FirstEnergy's total electric distribution deliveries were 40,581 thousand megawatt-hours (“MWH”) in the reported quarter, reflecting an increase of 0.3% from the prior-year level. Due to a cooler winter, heating-degree-days increased 2% from the prior-year quarter. Commercial sales as well as sales to industrial customers increased.
For the first quarter 2015, FirstEnergy reported operating income of $594 million, up 52% year over year.
Interest expenses in the reported quarter were $279 million, reflecting a 5.2% increase from $265 million a year ago.
Financial Update
FirstEnergy's cash and cash equivalents were $90 million as of Mar 31, 2015, up from $85 million as of Dec 31, 2014.
Cash from operating activities in the quarter was $193 million, comparing favorably with $92 million used in operations in the year-ago quarter.
Long-term debt and other long-term obligations as of Mar 31, 2015 were $19.13 billion, improving slightly from $19.18 billion at 2014 end.
Guidance
FirstEnergy reiterated the 2015 operating earnings projection between $2.40 and $2.70 per share. GAAP earnings for 2015 are expected in the band of $2.17 to $2.47 per share.
Second-quarter 2015 operating earnings are expected at 42–50 cents per share while GAAP earnings are expected at 37–45 cents per share.
Other Company Releases
American Electric Power Company Inc. AEP reported first-quarter 2015 operating earnings of $1.28 per share, beating the Zacks Consensus Estimate of $1.11 by 15.3%.
CMS Energy Corp. CMS reported first-quarter 2015 earnings per share of 73 cents on an adjusted basis. Quarterly earnings surpassed the Zacks Consensus Estimate by 10.6%.
NextEra Energy, Inc. NEE announced first-quarter 2015 earnings of $1.41 per share, beating the Zacks Consensus Estimate of $1.28 by 10.2%.
Our View
FirstEnergy posted solid results with both the top and the bottom lines beating the respective Zacks Consensus Estimate.
In 2014, this utility made quite a few large-scale investments at its subsidiaries for enhancing electric reliability. FirstEnergy will continue to allocate capital expenditure for the same in 2015.
This Zacks Rank #3 (Hold) company has new projects for substations, transmission lines and circuit upgrades lined up for the current year. The company intends to shell out $4.2 billion from 2014 through 2017 to meet rising electric load growth of 1,100 MW in the next five years.
These investments will enable the company to strengthen its existing infrastructure and win more customers. We believe this will also lead to incremental returns going forward.
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