Pepco Holdings Inc. (POM) reported first quarter 2010 earnings from continuing operations of 27 cents per share, beating the year-ago figure of 13 cents and the Zacks Consensus Estimate of 20 cents.
The year-over-year growth stemmed from investments made in its utility infrastructure, which yielded robust transmission and distribution revenues. Lower interest expenses were also a boon.
GAAP earnings during the quarter were 28 cents versus 16 cents in the year-ago period. The difference in GAAP and operating earnings of the company was due to discontinued operations of 1 cent.
Total Revenue
Total revenue of the company at the end of the first quarter was $1.63 billion, down 10.2% from $1.82 billion in the year-ago period. The year-over-year decline was primarily due to lower contribution from Pepco Energy Services,partly countered by higher contribution from the Other category.
Quarterly Highlights
Total operating expenses of the company at the end of the first quarter of 2011 were $1.48 billion versus $1.69 billion in the year-ago period. The decline stemmed from lower fuel and purchase energy costs.
However, the operating expenses during the quarter decreased by 193 basis points as a percentage of total revenue, which had a positive impact on operating income. Operating income at Pepco was $149 million in first quarter 2011 versus $131 million in the prior-year quarter.
Interest expenses at first quarter end were $62 million versus $83 million at the end of the year-earlier period.
Financials Update
Cash and cash equivalents, including restricted cash, were $31 million as of March 31, 2011, similar to cash levels generated as of December 31, 2010.
Long-term debts of the company as of March 31, 2011 were $3,626 million versus $3,629 as of December 31, 2010.
Guidance
Pepco Holdings reiterated its 2011 earnings per share in the range of $1.10 to $1.25. The guidance excludes the impact of discontinued operations and assumes normal weather during the year.
Peer Comparison
In the energy products and services niche, the company competes with Constellation Energy Group Inc. (CEG). The latter announced operating earnings for the first quarter 2011 of 63 cents per share, falling short of Zacks Consensus Estimate of 96 cents and the year-ago quarter earnings of $1.43.
Constellation Energy’s quarterly revenues were $3.6 billion, falling short of the Zacks Consensus Estimate by $0.5 billion. On a year-over-year basis, revenues decreased by $16.4 million.
Our View
The company booked mixed results in the reported quarter, with its top line failing to out do our expectation. However, we are encouraged to see the company increasing its total consumer base by 9,000 from the year-ago level.
We would wait to see whether the investments made by the company in utility infrastructure and customer growth translate into top-line expansion in the forthcoming quarters.
Pepco Holdings currently retains a Zacks #3 Rank (short-term Hold rating).
Based in Washington, District of Columbia, Pepco Holdings, through its two operating divisions, Power Deliver and Competitive Energy, involves in transmission and distribution of electricity, as well as delivery and supply of natural gas.
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