Energy holding company, SCANA Corp. (SCG - Analyst Report) reported strong second-quarter results, driven by improved electric margins from customer growth and rate increases, partially offset by higher expenses.
Earnings per share came in at 60 cents, surpassing both the Zacks Consensus Estimate of 53 cents and the year-ago quarterly number of 54 cents. The company’s total operating revenue increased 11.9% year over year to $1,016.0 million and comfortably beat the Zacks Consensus Estimate of $911.0 million.
South Carolina Electric & Gas Company (SCE&G): Earnings from this segment, which is also SCANA's principal subsidiary, were 63 cents per share, up from the year-ago level of 59 cents per share. The increase was attributable to higher margins from base rate increases, along with customer addition. These margin increases were partially offset by increases in operating and maintenance expenses.
As of Jun 30, 2013, natural gas and electric customers of SCE&G increased 2.0% and 0.8% from the year-ago period to 325,000 and 675,000, respectively.
PSNC Energy: This segment reported a break-even like the year-ago period. As of Jun 30, 2013, PSNC Energy’s customer base increased 2.0% year over year to 495,000.
SCANA Energy-Georgia: The segment – housing SCANA’s retail natural gas marketing business in Georgia – digested a loss of 2 cents per share, flat year over year.
Corporate and Other, Net: This business segment posted loss of a penny versus a 2 cent loss per share in the year-ago period.
SCANA reaffirmed its full-year 2013 earnings guidance range of $3.25–$3.45 per share.
We expect SCANA to benefit from the new electric generation plants within its service territory and nuclear expansion projects going forward. The company is a stable, relatively strong and regulated integrated electric utility, supported by favorable regional demographics and electric utility rate. On the flip side, we are apprehensive of the company’s sensitivity to changes in coal, gas, oil and other commodity prices. Construction costs and delays could affect the timing of rate base growth, earnings, cash flow and balance sheet quality.
SCANA currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at electric utilities like Huaneng Power International, Inc. (HNP - Snapshot Report), Integrys Energy Group, Inc. (TEG - Analyst Report), and UNS Energy Corporation as attractive investments. All these firms sport a Zacks Rank #1 (Strong Buy).