Diversified energy company FirstEnergy Corp. FE reported second-quarter 2015 operating earnings of 53 cents per share, outpacing the Zacks Consensus Estimate by 10.4%. Earnings also improved 8.2% year over year.
The upside was driven by higher earnings at the Regulated Transmission business on the heels of incremental cost of service and rate base recovery at American Transmission Systems.
Including one-time items totaling 9 cents, FirstEnergy’s GAAP earnings were 44 cents per share, up 193.3% year over year.
Total Revenue
FirstEnergy generated total revenues of $3,462 million in the second quarter of 2015, beating the Zacks Consensus Estimate of $3,347 million by 3.4%. Revenues however dipped 1% 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 35,083 thousand megawatt-hours (“MWH”) in the reported quarter, reflecting a marginal decline of 0.3% year over year. The slight decline reflects lower usage by customers to some extent due to energy efficiency mandates.
FirstEnergy’s total expenses in the second-quarter came in at $2,867 million, down 4.2% from $2,995 reported in the second quarter of 2014.
For the second quarter 2015, FirstEnergy reported an operating income of $595 million, up 18.5% year over year.
Interest expenses in the reported quarter were $282 million, reflecting a 7.6% increase from $262 million a year ago.
Financial Update
FirstEnergy's cash and cash equivalents were $94 million as of Jun 30, 2015, up from $85 million as of Dec 31, 2014.
Cash from operating activities in the quarter was $797 million, comparing favorably with $714 million generated in the year-ago quarter.
Long-term debt and other long-term obligations as of Jun 30, 2015 were $18,570 million, down from $19,176 million at 2014 end.
Guidance
FirstEnergy reiterated the 2015 operating earnings projection between $2.40 and $2.70 per share. GAAP earnings guidance for 2015 was reduced to $2.13–$2.43 per share from an earlier projection of $2.17–$2.47 per share.
Third-quarter 2015 operating earnings are expected at 82–92 cents per share while GAAP earnings are expected at 76–86 cents per share.
Other Company Releases
DTE Energy DTE reported second-quarter 2015 operating earnings per share of 76 cents, lagging the Zacks Consensus Estimate of 84 cents by 9.5%.
Exelon Corporation EXC reported second-quarter 2015 adjusted operating earnings of 59 cents per share, surpassing the Zacks Consensus Estimate of 51 cents by nearly 15.7%.
Xcel Energy Inc. XEL recorded operating earnings of 39 cents per share in the second quarter of 2015, missing the Zacks Consensus Estimate by a penny.
Our View
FirstEnergy posted solid results with both the top and the bottom line beating the Zacks Consensus Estimate.
Since last year, this utility made quite a few large-scale investments at its subsidiaries for enhancing electric reliability and has planned an outlay of about $2.9 billion for 2015. FirstEnergy operates one of the largest transmission networks in the U.S. and is witnessing incremental revenues from investment in its transmission units.
FirstEnergy is switching its assets from competitive generation to regulated operations. Going forward, the company expects more than 80% of its total earnings per share to come from its regulated transmission and distribution business.
FirstEnergy currently has a Zacks Rank #4 (Sell).
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