Power utility company Progress Energy Inc. (PGN) announced its third-quarter 2010 operating earnings of $1.23 per share, which failed to meet the Zacks Consensus Estimate of $1.27. The results of the company were a penny higher than year-ago earnings of $1.22 per share.
The contribution to operating earnings from Progress Energy Carolinas was 79 cents a share, while Progress Energy Florida contributed 60 cents a share. Ongoing after-tax expenses from Corporate and Other Business were 16 cents a share in the reported quarter.
GAAP earnings in the quarter were $1.23 per share versus 88 cents in the year-ago quarter.
Although GAAP and operating earnings turned in at par figures, in the quarter under review, operating earnings saw a positive 1-cent impact from tax and a negative 1-cent impact from impairments.
Total Revenue
Total revenue of the company at the end of the third quarter was $2,957 million versus $2,823 million in the year-ago quarter, reflecting a growth of 4.7%. During the reported quarter, Progress Energy Carolinas contributed $1,414 million and Progress Energy Florida contributed $1,543 million to total revenue.
Reported results came in lower than the Zacks Consensus Estimate of $3,062 million.
Energy Sales and Supply
Total electricity sales in the quarter were 28.77 billion kilowatt hours (KWh), up 5% from 27.37 billion KWh a year ago. Progress Energy Carolinas’ electricity sales totaled 16.35 billion KWh, up 7.6% year over year, while Progress Energy Florida sold 12.42 billion KWh, up 1.9% year over year.
Total energy supply in the quarter was 30.4 billion KWh, up 7.8% from 28.96 billion KWh in the year-ago quarter, with Progress Energy Carolinas contributing 17.1 billion KWh (56% of total supply) and Progress Energy Florida the remaining 13.3 billion KWh (44% of total supply).
Operational Update
Operating expenses during the quarter increased marginally year over year by 2.8%. The increase was mainly due to higher purchased power during the quarter.
However, following the preceding quarter trend, operating expenses, as a percentage of total revenue, declined by 139 basis points year over year, which benefited the operating results of the company. Operating income was $753.0 million versus $676.0 million in the third quarter of 2009, reflecting a growth of 11.4%.
Interest charges in the third quarter decreased by $21 million to $189 million from $168 million in the year-ago quarter.
Financial Update
Cash and cash equivalents as of September 30, 2010, were $691 million versus $155 million as of September 30, 2009.
The total debt-to-capital ratio of the company at the end of third-quarter 2010 was 56.0% versus 55.9% in the year-ago period.
Outlook
Progress revised its operating earnings guidance to a range of $3.00 to $3.05 per share from $2.95 to $3.05 per share earlier. The company raised the low end of the guidance by 5 cents to reflect the impact of favorable weather.
Our View
We appreciate the cost control measures of the company, which had a positive impact on earnings. Moreover, the gradual improvement in the economies of Carolinas and Florida will help the company to improve its top-line going forward.
Progress Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our log-term Neutral rating on the stock.
Based in Raleigh, North Carolina, Progress Energy, engages in the generation, transmission, distribution, and sale of electricity in North Carolina, South Carolina, and Florida.
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