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Mark Vickery

Earnings Preview: Dominion Resources

AEP NI D

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Electric utility Dominion Resources Inc. (D - Snapshot Report) is slated to release its third-quarter 2012 earnings results before the market opens on October 25, 2012.

Second Quarter Performance

Dominion Resources reported second quarter 2012 operating earnings of 59 cents per share, in line with the Zacks Consensus Estimate as well as the year-ago earnings. Dominion’s earnings were at the mid-point of the guidance of 55–65 cents.

Operating earnings for the quarter were $337 million, inching down from $338 million in the year-ago quarter.

Lower operations and maintenance expenses and higher contributions from unregulated retail energy marketing operations were offset by milder-than-normal weather in the regulated electric service territory and lower merchant generation margins.

Dominion’s operating revenue of $3.0 billion in the second quarter declined 8.8% from the year-ago quarter. Lower revenue across all segments induced the decline. Revenue also fell short of the Zacks Consensus Estimate of $3.25 billion.

Total operating expenses in the second quarter reached $2.29 billion, down 10.7% year over year. The decline was due to lower electric fuel and other energy related purchases, decline in purchased electric capacity and purchased gas and lower operations and maintenance expenses.

A Sneak Peek at 2012

Dominion expects to deliver third quarter operating earnings in a range of 90 cents to $1.00 per share. The company’s guidance is based on an expected higher rate of adjustment clause earnings, growth in electric service territory and lower operations and maintenance expenses. However, these positives would be moderated by normal weather and lower merchant generation margins.

Dominion affirmed full year 2012 operating earnings in a band of $3.10–$3.35 per share.

Zacks Consensus

The Zacks Consensus Estimate for the third quarter 2012 is 97 cents per share, up 2.5% from 95 cents reported in the year-ago quarter. The current Zacks Consensus Estimate ranges between 95 cents per share and $1.03 per share.

The full year 2012 Zacks Consensus Estimate is $3.16, up 3.59% year over year. The current Zacks Consensus Estimate ranges between $3.10 per share and $3.30 per share.
Estimate Revisions Trend

Agreement

The past 30 days have seen one of eight estimates declining for the third quarter, while none moved in the opposite direction. There were no changes in the quarterly estimates in the last 7 days.

For full year 2012, of the 16 available estimates, there has been 1 revision in the negative direction, in the last 30 days. There were no changes in the estimates in the prior 7 days.

Magnitude

The Zacks Consensus Estimate for the third quarter inched down by a penny in the last 30 days, while it remained unchanged for the full year. In the past 7 days, the consensus earnings estimates remained static both for the third quarter and full year 2012.

Surprise History

With respect to earnings surprise, the company’s performance was mixed in the last four quarters. The results of the company surpassed our expectation in one of the last four quarters, while earnings fell short of expectation in two other quarters and matched our expectation in one quarter.

The earnings surprise in the last four quarters ranged from (1.16%) to 1.06%. The average surprise over the last four quarters remained a negative 3.16%.

Zacks Rank

Dominion Resources retains a Zacks #3 Rank which translates into a short-term Hold rating. The company primarily competes with American Electric Power Co. (AEP - Analyst Report) and NiSource Inc. (NI - Analyst Report).

Richmond, Virginia based Dominion Resources Inc. is founded in 1909. The company together with its subsidiaries, engages in producing and transporting energy in the U.S. With approximately 15,800 employees, the company’s market capitalization is $30.72 billion.

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