American Electric Falls Behind – Analyst Blog

American Electric Power Company Inc. (AEP) reported tepid first quarter fiscal 2010 results before the bell. In the reported quarter, the company fell short of the Zacks Consensus Estimate of 78 cents by two cents with an EPS of 76 cents. The company’s results also fell behind the year-ago quarterly EPS of 89 cents.

 

On a reported basis, including one-time items, earnings came in at 72 cents in the reported quarter compared with 89 cents in the year-ago quarter. The company in the reported quarter absorbed the changes in the health care bill, which eliminated the tax deduction that was previously available for Medicare benefit costs reimbursed. This took away 4 cents from the reported quarterly earnings per share.

 

The variance in year-over-year EPS reflects the dilutive effects of additional shares issued during fiscal 2009. First quarter 2010 EPS is based on 478 million shares compared with 407 million shares in the first quarter of 2009.

 

 

Revenue rose marginally to $3.6 billion in the reported quarter from $3.5 billion in the year-ago period. American Electric Power’s earnings fell to $344 million compared with $360 million in first-quarter 2009. In the reported quarter, retail volume sales of electricity rose 2.7% year-over-year. Of this, residential volume sales rose 8.6% over the prior year quarter.

 

However, this was partially offset by lower commercial, industrial and miscellaneous sales, which fell 1.2%, 1% and 0.8%, respectively year over year. Wholesale electricity volume sales, however, rose 20.1% year over year in the reported quarter. Ongoing earnings for the quarter were $365 million compared with $360 million in first-quarter 2009.

 

 

Ongoing earnings from Utility Operations increased $19 million to $362 million in the reported quarter. The improvement was driven by higher retail margins because of successful rate proceedings, the effects of favorable weather and higher margins for both off-system sales and transmission revenues. These increases were somewhat offset by lower sales to AEP’s commercial and industrial customers, higher operating expenses.

 

Ongoing earnings from AEP’s River Operations reduced to $4 million from $11 million in the year-ago period. This was primarily due to lower grain loadings, higher fuel and other operating expenses.

 

Ongoing earnings from Generation and Marketing segment also decreased $14 million in the first-quarter 2010 to $10 million. This was due to lower gross margins from marketing activities.

 

All Other, which includes the Parent Company and other investments of the company absorbed $7 million lower loss year over year of $11 million. This was due to lower expenses.

 

 

American Electric Power reaffirmed its ongoing guidance range for fiscal 2010 in the range of $2.80 to $3.20. This is in line with the Zacks Consensus EPS Estimate of $3.04 for fiscal 2010.

 

Columbus, Ohio-based American Electric Power is one of the largest public utility holding companies, catering to approximately 5.2 million customers spread over 11 states.