Consolidated Edison Inc.’s (ED) fiscal second-quarter earnings stood at 48 cents per share that beat the Zacks Consensus Estimate by a penny and was ahead of the year-ago EPS of 42 cents. However, GAAP EPS of 55 cents was almost one-fourth of the year-ago figure of $2.02. However, year-ago quarterly earnings were boosted by a $260 million gain on sale of assets.
The EPS variations reflect the year-over-year differences, where Con Edison of New York benefited from 28 cents per share as higher rates authorized higher recovery of costs. This was partially offset by 6 cents from higher operations and maintenance expense, 12 cents from depreciation and 5 cents from interest expense, and 1 cent from dilutive stock issuance. The net effect was a 4-cent spike in EPS year over year while Orange and Rockland utilities remained steady.
The real variation in EPS year over year came from Competitive energy businesses where EPS gap got wider due to absence of 99 cents from discontinued operations, 50 cents from gain on the sale of generation projects, 4 cents from net mark-to-market effects. This was compensated to a small extent by 2 cents higher operating earnings per share.
The bottom-line results also reflect the dilutive effect of a higher weighted average number of common shares outstanding of 275.3 million, compared to 273.5 million shares in the prior-year quarter.
On the revenue front, Consolidated Edison witnessed a 9.7% fall year over year to $2.8 billion. Although electricity revenues held firm, the downside came from all the other segments – gas, stream and non-utility.
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 (Con Edison of New York) and Orange and Rockland Utilities (O&R).
Con Edison of New York is a regulated utility that provides electricity to roughly 3.3 million customers, natural gas to 1.1 million customers, and steam services to about 1,850 customers, primarily in New York City and Westchester County. O&R serves nearly 400,000 electric and gas customers in southeastern New York State, northern New Jersey, and northeastern Pennsylvania.
Consolidated Edison’s future growth will be largely dependent on rate increases of its utility subsidiaries. However, on account of uncertain outcome from the pending regulatory cases we maintain our Neutral recommendation on Consolidated Edison.
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