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PG&E Corporation’s (PCG - Analyst Report) adjusted operating earnings per share of 79 cents in the second quarter of 2013 were ahead of the Zacks Consensus Estimate of 72 cents, backed by its gas-related commitments. However, the reported figure came in below the year-ago number of 81 cents by 2.5%.

On a reported basis, the company clocked earnings per share of 74 cents compared with earnings of 56 cents in the year-ago quarter.

Revenue Update

PG&E’s top line increased 5.1% to $3,776.0 million in the quarter from $3,593.0 million in the year-ago period and surpassed our expectation of $3,732.0 million. Electric revenue generated $3,059.0 million in the quarter (up 4.4% year over year), while Natural Gas clocked $717.0 million (up 8.3%).


On the cost front, total operating expenses stood at $3,140.0 million in the quarter, up from the year-earlier level of $3,126.0 million.


PG&E affirmed its full year 2013 operating earnings guidance range of $2.55–$2.75 per share.

Zacks Rank

The company retains a Zacks Rank #3 (Hold). In the near term, we would advise investors to focus on its Zacks Rank #1 (Strong Buy) peer Integrys Energy Group, Inc. (TEG - Analyst Report) and Zacks Rank #2 (Buy) peers IdaCorp, Inc. (IDA - Snapshot Report) and NiSource Inc. (NI - Analyst Report).

PG&E Corporation nevertheless has a solid portfolio of regulated utility assets that offer a stable earnings base and substantial long-term growth potential. The company strives to optimize generation margins by improving its cost structure, performance and reliability of its nuclear as well as fossil units.

Going forward, we expect the company’s earnings growth to be driven by favorable decisions from California Public Utilities Commission (CPUC) and Federal Energy Regulatory Commission, as well as long-term supply agreements, diversification into alternative power sources and infrastructure improvement programs resulting in rate base growth.

However, the present unfavorable macro backdrop, tepid demand for electricity, any accidental charges or severe fluctuation in prices keep us concerned.

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