Constellation Energy Group Inc.’s (CEG) earnings for the third quarter of fiscal 2010 came in below the Zacks Consensus Estimate of 64 cents, slipping by 16 cents to 48 cents. The quarter’s earnings were also below the year-ago EPS of $1.23 by a large margin of 75 cents.

On a reported basis, including one-time items, loss per share came in at $6.99, compared with earnings of 69 cents in the third quarter of 2009.

Operational Results

Constellation Energy’s total revenues of close to $3.97 billion lagged 1.4% compared to the Zacks Consensus Estimate of $4.03 billion. On a year-over-year basis, revenues decreased 1.5% from $4.03 billion in the prior-year quarter.

Non-regulated revenues fell 1.5% year over year to $3.11 billion, regulated electric revenues fell 1.5% to $776.30 million while regulated gas revenues remained constant at $77.70 million.

In the reported quarter, electricity distribution volume rose 8.3% year over year to 3,928 thousands of megawatt hour. Residential volume sales rose 13.9%, commercial rose 5.9% while industrial fell 3.6% compared to the prior year. Gas distribution volumes fell 9.1% to 14,314 thousands of dekatherm.

Segment Results

Baltimore Gas and Electric Company (BGE) reported adjusted earnings of 14 cents per share, in line with the year-ago quarterly results, due to stable customer collections.

The Generation segment reported adjusted earnings of 41 cents per share, compared with adjusted earnings of 94 cents in the same period last year. The decline was driven primarily by the sale of a 49.99% interest in Constellation Energy’s nuclear business to EDF Group in November 2009. The sale of power at lower hedged prices also contributed to the segment’s decline in third-quarter earnings.

The NewEnergy segment reported adjusted earnings of 7 cents per share, compared with 16 cents per share last year. This year-over-year variance is largely attributable to the loss of contracts linked to its legacy London-based coal and freight business.

Financial Condition

Constellation Energy reported $1.3 billion of cash and cash equivalents at the end of the third quarter 2010, compared to $3.4 billion at fiscal-end 2009. Long-term debt (net of current portion) fell to $3.8 billion, compared to $4.4 billion at fiscal-end 2009.

Outlook

Based in Baltimore, Maryland, Constellation Energy supplies energy products and services in North America. The company operates in three segments: Merchant Energy, Regulated Electric and Regulated Gas.

Constellation Energy retained its fiscal 2010 earnings guidance in the range of $3.05 – $3.45 and its 2011 guidance range of $3.25 –$3.65. This is largely in line with the Zacks Consensus Estimate of $3.24 for 2010 and $3.41 for 2011.

We have a 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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