Before the bell, Constellation Energy Group Inc. (CEG) reported its second quarter 2011 results. In the reported quarter, the company with adjusted earnings per share of 76 cents came in below the Zacks Consensus Estimate of 82 cents. However, results were ahead of year-ago earnings of 71 cents.
On a reported basis, including one-time items, earnings per share came in at 49 cents per share versus 36 cents in the year-ago quarter.
In the reported quarter the variance between reported and adjusted earnings was 27 cents per share.
Of this, 15 cents were due to the amortized economic value of Constellation Energy Nuclear Group, LLC (CENG) joint venture power purchase agreement.
Another 12 cents were due to the amortization of Constellation Energy Nuclear Group, LLC joint venture basis difference.
Another 10 cent differential was due to costs incurred in connection with the pending merger with Exelon Corporation (EXC). Earlier in April 2011, the two companies signed a definitive agreement to combine the two companies in a stock-for-stock transaction. The resulting company will retain the Exelon name and will be based in Chicago.
Finally, a penny differential between reported and adjusted earnings came from credit facility amendment fees incurred in connection with the 2009 stake sale of Constellation Energy Nuclear Group, LLC to Électricité de France (EDF) Group.
All this was partially offset by a gain of 11 cents from a settlement with the Department of Energy (DOE).
Operational Results
Constellation Energy's quarterly revenues of $3.36 billion were way behind the Zacks Consensus Estimate of $3.95 billion. On a year-over-year basis, revenues decreased marginally by $49.90 million.
Non-regulated revenues rose $145.50 million year over year to approximately $2.70 billion, regulated electric revenues decreased $104.20 million to $546.90 million while regulated gas revenues rose $8.60 million to $108.2 million. Overall net income increased to $99.20 million from $72.60 million in the previous year.
Quarterly Segment Results
Baltimore Gas and Electric Company (BGE) overseeing the company’s regulated business reported adjusted earnings of 9 cents per share, up from 7 cents per share in the year-ago quarter. The increase is primarily the result of higher electric distribution revenue and increased transmission rates.
The Generation segment reported adjusted earnings of 41 cents per share, down from 43 cents in the year-ago quarter. The decline was mainly due to the result of an increase in outage days at Constellation Energy Nuclear Group, LLC facilities. This was partially offset by the earnings contribution from the acquisition of five power plants in the Boston area during January 2011.
NewEnergy segment reported adjusted earnings of 26 cents per share versus earnings of 21 cents in the year-ago quarter. The upside in earnings is primarily due to a mark-to-market gain. This was partially offset by costs associated with residential marketing.
Financial Condition
Constellation Energy reported approximately $954.80 million of cash and cash equivalents at the end of the reported period, compared with $2.03 billion at fiscal-end 2010. Long-term debt (net of current portion) was $3.95 billion, compared to $4.05 billion at fiscal-end 2010.
Outlook
Based in Baltimore, Maryland, Constellation Energy supplies energy products and services in North America. The company lowered its fiscal 2011 earnings guidance range by a nickel to $3.05–$3.35 per share versus the earlier guidance of $3.10–$3.40 per share.
In the near-term we are maintaining our Zacks #3 Rank (short-term Hold rating) on the stock. This implies that the stock is expected to perform in line with the broader U.S. equity market over the next 1–3 months. We are Neutral on Constellation Energy in the long-term.
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