Energy holding company, SCANA Corp. (SCG - Analyst Report) reported strong third-quarter 2013 results, driven by improved electric margins from customer growth and rate increases, partially offset by higher expenses.
Earnings per share came in at 94 cents, surpassing the Zacks Consensus Estimate of 92 cents and improving from the year-ago quarterly number of 91 cents. The company’s total operating revenue increased 1.3% year over year to $1,051.0 million but came below the Zacks Consensus Estimate of $1,128.0 million.
South Carolina Electric & Gas Company: Earnings from this segment, which is also SCANA's principal subsidiary, were $1.00 per share, down from the year-ago level of $1.01 per share. This was due to increases in operating and maintenance expenses. The decrease was partially offset by higher margins from base rate increases, along with customer addition.
As of Sep 30, 2013, natural gas and electric customers of SCE&G increased 2.2% and 1.3% from a year ago to 325,000 and 675,000, respectively.
PSNC Energy: This segment digested a loss of 3 cents per share flat with the year-ago period. As of Sep 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 3 cents per share, flat year over year.
Corporate and Other, Net: This business segment was at a break-even point in the reported quarter 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 NRG Yield, Inc. (NYLD - Snapshot Report), Tractebel Energia S.A. (TBLEY), and UNS Energy Corporation as attractive investments. All these firms sport a Zacks Rank #1 (Strong Buy).