American Electric Beats

American Electric Power Company Inc. (AEP - Analyst Report) released stable third quarter results before the opening bell today. In the reported quarter, the company beat the Zacks Consensus Estimate of 85 cents by eight cents with identical year-over-year EPS of 93 cents. 

Revenue fell 17% to $3.5 billion in the quarter from $4.2 billion in the year-ago period. A tepid economy, coupled with a summer, which was cooler than average, affected electricity demand in the quarter. The downturn affected demand for industrial customers most. Industrial retail sales fell 16.9% year-over-year, while commercial retail sales declined 1.2%. However, residential retail sales remained stagnant. 

Ongoing earnings rose to $443 million from $374 million in the year-ago quarter. Ongoing earnings from Utility Operations increased $88 million year-over-year. The upside came from increased rates and lower operation and maintenance expenses. However, this was partially offset by lower sales to industrial customers and off-system sales and higher depreciation and interest expenses. 

AEP River Operations' earnings of $10 million were lower by a million year-over-year due to a decline in barge freight revenue on account of weak import market. Ongoing earnings for Generation and Marketing cascaded to $5 million from $11 million year-over-year. This was due to lower gross margins at the Oklaunion Power Station on account of lower power prices in the Electric Reliability Council of Texas (ERCOT). 

American Electric Power tightened its fiscal 2009 EPS guidance range to $2.90 - $3.05 from the previous guidance range of $2.75 - $3.05. American Electric is one of the largest public utility holding companies catering to approximately 5.2 million customers spread over 11 states. 

We maintain our cautious Neutral recommendation on the stock.