Public Service Enterprise (PEG) reported operating earnings of 92 cents per share for the third quarter of 2009, four cents higher than the Zacks Consensus Estimate of 88 cents. This was achieved by focus on improvement of the cost structure and hedging which offset a substantial portion of its lower demand. However it fell short by two cents from the year-ago figure of 94 cents. Revenue fell 18.3% year-over-year to $3 billion in the reported quarter. The downside came from all the three segments – PSEG Power, PSE&G, and PSEG Energy Holdings.
In the reported quarter, PSEG Power clocked operating earnings of $339 million (67 cents per share) compared with operating earnings of $360 million (71 cents per share) for in the year-ago quarter. Performance was affected by a decline in demand (8 cents per share), migration of customers (4 cents per share) and trading (a penny per share). Generation in the reported quarter also declined 10% year-over-year as a result of a contraction in economic activity and cooler than normal weather.
PSE&G reported operating earnings of $87 million (17 cents per share) compared with operating earnings of $97 million (19 cents per share) in the year-ago quarter. In the reported quarter Electric revenues declined by 2 cents per share. Performance was also affected by a decline in economic activity and cooler than normal weather. Operating and maintenance expense associated with higher pension costs increased 2 cents per share.
PSEG Energy Holdings reported operating earnings of $18 million (4 cents per share) for the third quarter of 2009 as compared to operating earnings of $25 million (5 cents per share) in the year-ago quarter. In the reported quarter, a decline in energy prices was the primary reason for the reduction in operating earnings. Also, operating profit from its generating capacity in Texas declined by 2 cents per share.
Public Service reported $1.3 billion in cash from operating activities at the end of the reported quarter, compared to $1.6 billion reported at the end of the year ago quarter. Cash and cash equivalents at the end of the reported quarter was $130 million, while long term debt stood at $6.8 billion.
Public Service reaffirmed its fiscal 2009 EPS guidance range of $3.00 – 3.25. However the company is apprehensive about achieving the upper end of the guidance range. We maintain our market Neutral recommendation on the shares.
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