PG&E Corp.’s (PCG) second-quarter earnings of 83 cents per share stopped a penny short of the Zacks Consensus EPS estimate. However, it surpassed the year-ago profit of 80 cents a share. Also, quarterly GAAP EPS rose to $1.02 boosted by tax refund and recovery of Hydro divestiture costs, compared to 80 cents in the year-ago period.
San Francisco, California-based PG&E’s earnings grew 32% to $388 million due to one-time gains and higher power rates. Operating income grew 12% to $656 million but revenue fell to $3.19 billion from $3.58 billion year over year. Revenue for both electricity and natural gas was down.
The quarter-over-quarter increase in earnings from operations was due to higher authorized revenue on superior capital investments in improvement of utility infrastructure. This was partially offset by expenses for environmental remediation activities.
PG&E raised long-term debt of $2.2 billion in 2008 and $1.2 billion in 2007 for financing its expansion plans. The utility’s investments in property, plant and equipment totaled $3.7 billion in 2008 and $2.8 billion in 2007.
The company has $13 billion of planned capital expenditures in the pipeline for the 2009 to 2011 period, including approximately $3.6 billion in this year. This means that its debt load will not lighten anytime soon. PG&E deployed $2.1 billion towards capital expenditure in the first half of the year.
The company reaffirmed its previous guidance for earnings from operations in the range of $3.15-$3.25 per share for fiscal 2009, $3.35-$3.50 per share for fiscal 2010 and $3.65-$3.85 per share for fiscal 2011.
PG&E is the parent company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company, which serves approximately 5.1 million electric and 4.3 million natural gas customers in northern and central California. The utility also operates hydro-electric, nuclear and fossil-fueled power plants.
Going forward, growth will came from PG&E’s focus on regulated utility operations, positive investment factors including favorable decisions from the CPUC and FERC (including a CPUC authorized 11.35% ROE until 2011), long-term supply agreements and infrastructure improvement programs. However, due to risks from pending regulatory approvals, earnings-dilutive stock issuances and an over-leveraged balance sheet, we maintain our Neutral recommendation on PG&E.
Read the full analyst report on “PCG”
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