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Analyst Blog

Dominion Resources, Inc. (D - Snapshot Report) reported fourth-quarter 2013 operating earnings of 80 cents per share, missing the Zacks Consensus Estimate by 9.1%. Quarterly earnings were 15.9% higher than the year-ago figure primarily on the back of lower taxes and a decrease in other operations and maintenance expenses.

On a GAAP basis, the company’s earnings per share were 74 cents compared with a loss of $1.15 a year ago.

Dominion’s yearly operating earnings of $3.25 per share lagged the Zacks Consensus Estimate by 2.7%. On a year-over-year basis, earnings increased 6.6% owing to a decrease in operations and maintenance expenses, lower taxes and benefit from an additional asset contribution to Blue Racer. These positives were partially offset by mild weather.

Reported annual GAAP earnings was $2.93 per share, higher than the year-ago figure of 53 cents per share. The variance between GAAP and operating earnings was due to the combined effect of several charges associated with the sale of Brayton Point and Kincaid power stations and the repositioning of the company’s Producer Services businesses, impact of Virginia Power biennial review order, operation and maintenance expenses reduction initiative, and gains related to the nuclear decommissioning trust funds and asset retirement obligations (“ARO”) revisions.

Operational Update

In fourth-quarter 2013, Dominion’s operating revenues of $3.2 billion surpassed the Zacks Consensus Estimate by 4.8%. Reported revenues surged 6% year over year primarily due to higher revenues from the company’s Dominion Virginia Power, Dominion Generation segments. This was partially offset by a drop in sales from Dominion Energy and Corporate and Other businesses.

For 2013, the company’s total revenues of $13.1 billion fell short of the Zacks Consensus Estimate by 0.6%. Annual revenues however surged 2.7% year over year, mainly due to increased rate adjustment clause revenues and a rise in revenues associated with the company’s gas transmission growth projects.

In the quarter under review, total operating expenses decreased 4.7% year over year to $2.4 billion, mainly due to lower costs for purchased gas, and other operations and maintenance expenses.

Dominion’s quarterly operating margin improved to 26.7% from the year-ago figure of 25.8%.

Interest and related charges in the reported quarter was $0.2 billion, up 16.5% from the prior-year level.

Financial Update

Dominion's cash balance as of Dec 31, 2013 was $0.3 billion versus $0.2 billion a year ago.

As of Dec 31, 2013, long-term debt was $19.3 billion versus $16.9 billion as of Dec 31, 2012.

Net cash provided by operating activities during 2013 was $3.4 billion, lower than $4.1 billion in the year-ago comparable period.

Guidance

Dominion expects to deliver first-quarter 2014 operating earnings in the band of 85 cents - $1.00 per share.

For 2014, the company provided operating earnings guidance in the range of $3.35 - $3.65 per share.

The company considered several factors including higher revenues from its capital projects subject to rider treatment, a return to normal weather, expected growth at its electricity service territory and a lower effective income tax rate while reporting estimates. The company expects an increase in operating and maintenance expenses, higher interest expenses, and higher depreciation to negatively impact the aforesaid positives.

Peer Comparison

American Electric Power Company Inc. (AEP - Analyst Report) reported fourth-quarter 2013 operating earnings of 60 cents per share, beating the Zacks Consensus Estimate by 7.1%.

Zacks Rank

Dominion Resources currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same sector include Wisconsin Energy Corp. (WEC - Analyst Report) and The AES Corp. (AES - Analyst Report), each with a Zacks Rank #2 (Buy).

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