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Public Service Enterprise Group Inc. (PEG - Analyst Report) reported first quarter 2014 earnings of $1.01 per share, beating the Zacks Consensus Estimate of 97 cents by 4.1%. Earnings were up 18.82% year over year. The results reflect the investments made by the company in its stable rate regulated business.

On a GAAP basis, quarterly earnings were 76 cents per share versus 63 cents per share a year ago.

The difference between GAAP and adjusted operating earnings of 25 cents was primarily due to the combined impact of a 26 cent mark-to-market loss from economic hedging activities and a 1 cent storm operating & maintenance expense. One-time gains included 1 cent from Decommissioning Trust (NDT) Fund related activities.

Total Revenue

Revenue in the reported quarter was $3,223.0 million, up 15.7% from the year-ago figure of $2,786.0 million. Revenue was also above the Zacks Consensus Estimate by 9.1%.

During the reported quarter, Electric sales volume increased 3.6% year over year to 10,281 million kwh, while gas sales volume was up 17.9% to 1,345 million therms.

Highlights of the Release

Total operating expenses were $2,518 million, up 15.7% from the year-ago level. The increase in total expenses was primarily due to a 20.6% rise in operation and maintenance expenses and a 17.4% increase in energy costs.

Interest expenses in the reported quarter were reduced to $97 million from $102 million in the year-ago period.

Segment Performance

PSEG Power: Segment operating earnings were $293.0 million versus $254.0 million in the prior-year period. The results reflect higher capacity revenues, dispatch flexibility and the diverse fuel mix of its generation fleet.

PSE&G: The segment generated operating earnings of $214.0 million, up 19.6% year over year. The results were driven by increased revenue associated with a greater level of investment, an improvement in demand and a reduction in pension expense.

PSEG Enterprise/Other: The segment generated operating earnings of $8 million compared with break-even operating results during the first quarter of 2013.

Financial Update

As of Mar 31, 2014, the company’s cash balance was $655 million compared with $420 million as of Mar 31, 2013.

Long-term debt as of Mar 31, 2014 totaled $8.1 billion, in line with the 2013 end level.

In the first three months of 2014, net cash flows provided by operating activities were $1.11 billion versus $0.87 billion in the year-ago comparable period.

2014 Guidance

PSE&G’s operating earnings are expected to range within $705 million and $745 million. PSEG Power's operating earnings are forecast in the $550 to $610 million range. PSEG Enterprise/Other’s operating earnings are expected to range within $35 million and $40 million.

Public Service Enterprise expects its 2014 operating earnings per share to be within a range of $2.55 to $2.75.

Other Company Release

CMS Energy Corp. (CMS - Analyst Report) posted first-quarter 2014 earnings per share of 75 cents, surpassing the Zacks Consensus Estimate of 64 cents by 17.2%

Entergy Corp. (ETR - Analyst Report) reported first-quarter 2014 earnings of $2.29 per share, beating the Zacks Consensus Estimate by 8.5%

American Electric Power Company Inc. (AEP - Analyst Report) reported first quarter 2014 operating earnings of $1.15 per share, beating the Zacks Consensus Estimate of 91 cents by 26.4%

Our View

Public Service Enterprise Group was able to keep the earnings streak alive thanks to the investments made by the company in the rate-regulated operations. Its merchant generation business is also expected to provide bottom-line support going forward.

We believe the gradual improvement in economic conditions in its service territories and consistent capital investment to upgrade its electric and natural gas facilities will allow the company to maintain its strong performance.

Public Service Enterprise Group currently holds a Zacks Rank #2 (Buy).

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