Consolidated Edison Inc. (ED) announced its first quarter results of fiscal 2011 with earnings per share (EPS) of 99 cents falling short of the Zacks Consensus EPS Estimate of $1.00. Earnings however comfortably beat the year-ago quarterly number of 93 cents.
On a reported basis, the company reported earnings of $1.07 per share compared with 80 cents per share in the year-ago quarter.
The GAAP EPS variations reflect the year-over-year difference of 27 cents per share. Of this, Con Edison of New York benefited by 18 cents from higher rates authorizing increased recovery of costs; 2 cents from lower operations and maintenance expense; and a penny from lower net interest expense. This was partially offset by 10 cents from higher depreciation, property taxes and other tax matters; and 5 cents from higher dilutive stock issuances.
The upshot was a 6-cent upside in EPS year over year while the Orange and Rockland utilities chipped in with an upside of 2 cents year over year. In the Competitive Energy businesses, EPS rose by 19 cents mainly due to after-tax net mark-to-market gains.
Operational Results
Consolidated Edison reported operating revenue of $3.3 billion, a decrease of $113 million over the year-ago quarter and way behind the Zacks Consensus Estimate of $3.7 billion. Of this Electric revenues fell $20 million to $1.9 billion, gas revenues fell $18 million to $755 million and non-utility revenues shrunk $93 million to $400 million. The only saving grace was steam revenues which rose $18 million to $325 million.
Consolidated Edison’s earnings from ongoing operations were $289 million compared with $264 million in the year-ago quarter. Its net income was $311 million compared with $226 million in the year-ago quarter.
Financial Condition
Consolidated Edison ended the quarter with cash and cash equivalents of $516 million and long-term debt of $10.7 billion, compared to $338 million of cash and $10.7 billion of long-term debt in the year-ago period. In the reported quarter, the company generated $362 million of cash from operating activities and deployed $398 million towards construction expenditure, and disbursed $173 million as dividends.
Outlook
Consolidated Edison reaffirmed its EPS guidance range of $3.45 – $3.65 from ongoing operations for fiscal 2011.
New York City-based Consolidated Edison is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. Consolidated Edison’s regulated businesses operate through two subsidiaries — Consolidated Edison Company of New York (CECONY) and Orange and Rockland Utilities (O&R).
Consolidated Edison of New York is a regulated utility in New York City and Westchester County. O&R serves electric and gas customers in southeastern New York State, northern New Jersey, and northeastern Pennsylvania. Consolidated Edison’s unregulated businesses operate through three subsidiaries – Consolidated Edison Development (engaged in infrastructure development), Consolidated Edison Energy (supplies energy in the wholesale market) and Consolidated Edison Solutions (provides retail energy).
Consolidated Edison is a predominantly regulated utility with multi-year rate plans for its services. However the stock is currently trading at a premium per the current fiscal earnings estimates vis-à-vis its peers like American Electric Power Company Inc. (AEP) and Edison International (EIX). Consolidated Edison currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock.
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