Power utility company Progress Energy Inc. (PGN) announced its first-quarter 2011 operating earnings of 69 cents per share, which beat the Zacks Consensus Estimate of 67 cents by 2 cents. The company’s results were, however, below the year-ago earnings of 75 cents.
In the first quarter, Progress Energy Carolinas contributed 47 cents to operating earnings per share, while Progress Energy Florida contributed 38 cents. Ongoing after-tax expenses from Corporate and Other Business were 16 cents a share in the reported quarter.
Total Revenue
Progress Energy’s total revenue of $2,167 million lagged the Zacks Consensus Estimate of $2,428 million and the year-ago revenues of $2,535 million. The decline in total revenue was driven by a 10.3% decline in revenues from Progress Energy Carolinas and 18.7% decline in Progress Energy Florida’s revenues.
Operating Highlights
Total electricity sales in the first quarter totaled 22.6 billion kilowatt hours (KWh), down 11% from 25.5 billion KWh in the year-ago quarter. Progress Energy Carolinas’ electricity sales totaled 14.1 billion KWh, down 7.6% year over year, while Progress Energy Florida sold 8.4 billion KWh, down 16.8% year over year.
Total energy supply in the reported quarter was 23.8 billion KWh, down 3 billion KWh from 26.8 billion KWh last year, with Progress Energy Carolinas contributing 14.8 billion KWh (62% of total supply) and Progress Energy Florida the remaining 9.0 billion KWh (38% of total supply).
Operating expenses during the quarter decreased 16% year over year to $1.7 billion. This was driven by a 20% decline in the cost of fuel used for electric generation, a 16% dip in cost of power purchased, a 37% decline in depreciation, amortization and accretion expense and a 9% decline in taxes other than income tax, offset partially by a marginal 2.9% rise in operation and maintenance expense.
Despite the outstanding cost performance, operating income during the quarter decreased 8.7% year over year to $451 million mainly due to poor revenues recorded in the quarter.
Financial Update
Cash and cash equivalents as of March 31, 2011, were $172 million compared with $611 million as of December 31, 2010. Net long-term debt of the company as of March 31, 2011 was $11.868 billion up marginally from $11.864 billion as of December 31, 2010.
Cash flow from operations for the first quarter of 2011 totaled $446 million, down 23.9% from the year-ago level of $586 million.
Outlook
Progress Energy reiterated its operating earnings per share guidance of $3.00 to $3.20 per share for 2011.
Progress Energy said it sees modest growth and signs of recovery in the Carolinas and Florida. Going forward, the company remains focused on operational excellence, cost discipline and managing the business effectively as it speeds up approvals and integration planning associated with its pending merger with Duke Energy Corp. (DUK).
Our View
Raleigh, North Carolina-based Progress Energy is one of the nation’s larger pure-play electricity utilities with a solid opportunity for rate-base growth in the long-term. Progress Energy currently has a Zacks #3 Rank (short term Hold rating). This supports our Neutral recommendation on the stock.
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