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PG&E Corporation’s (PCG - Analyst Report) adjusted operating earnings per share of 88 cents in the third quarter of 2013 were ahead of the Zacks Consensus Estimate of 79 cents, backed by higher rate base earnings. However, the reported figure came in below the year-ago number of 93 cents by 5.4%.

On a reported basis, the company clocked earnings per share of 36 cents compared with earnings of 84 cents in the year-ago quarter.

Revenue Update

PG&E’s top line increased 5.0% to $4,175.0 million in the quarter from $3,976.0 million in the year-ago period and surpassed our expectation of $4,132.0 million. Electric revenue generated $3,517.0 million in the quarter (up 5.8% year over year), while Natural Gas clocked $658.0 million (up 0.8%).

Expenses

On the cost front, total operating expenses stood at $3,884.0 million in the quarter, up from the year-earlier level of $3,362.0 million.

Guidance

PG&E affirmed its full year 2013 operating earnings guidance range of $2.55–$2.75 per share. On a GAAP basis, the company expects earnings in the band of $1.60–$1.96 per share.

At the Peer

Recently, American Electric Power Company Inc. (AEP - Analyst Report) reported third quarter 2013 operating earnings of $1.10 per share, beating the Zacks Consensus Estimate of $1.08 by 1.9%. The quarterly figure also improved 7.8% from the year-ago profit level of $1.02. The improved performance reflects positive returns from the investments made in the company’s regulated operations.

Zacks Rank

The company holds a Zacks Rank #3 (Hold). In the near term, we would advise investors to focus on its Zacks Rank #1 (Strong Buy) peer UNS Energy Corporation (UNS - Snapshot Report) and Zacks Rank #2 (Buy) peer Alliant Energy Corporation (LNT - Snapshot 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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