Northeast Utilities ( NU - Analyst Report ) , a public utility holding company, is scheduled to report its third-quarter 2012 financial results on October 29, 2012.

Second-Quarter Recap

Northeast’s second-quarter 2012 pro-forma earnings per share were 45 cents, which is in line with the Zacks Consensus Estimate, but surpassed the year-ago earnings by a penny. The rise in earnings was due to continued investments in the company’s electric transmission systems, but partially offset by lower retail sales from each of its business segments and higher miscellaneous costs.

In second-quarter 2012, GAAP earnings per share were 15 cents compared with 44 cents reported in the year-ago quarter.

The variance between pro forma and GAAP earnings resulted from after-tax charges of 30 cents related to the merger of Northeast and NSTAR.

In second-quarter 2012, Northeast reported operating revenue of $1,629.0 million, up 55.4% from the year-ago figure of $1,048.0 million. Quarterly revenue beats the Zacks Consensus Estimate of $1,503.0 million.

Zacks Consensus

The Zacks Consensus Estimate for third-quarter 2012 is 65 cents per share, up from 51 cents per share reported in the prior-year quarter. Currently, the Zacks Consensus Estimate for the company’s earnings per share range between 62 cents and 70 cents.

For full-year 2012, the Zacks Consensus Estimate stands at $2.28 per share, lower than the prior-year earnings of $2.38 per share. The current Zacks Consensus Estimate for full-year 2012 ranges from $2.25 to $2.35 per share.

Estimate Revisions Trend

Agreement

For third-quarter 2012, we have observed that 2 estimates have moved upwards while no downward revisions were witnessed in the last 7 days. However, we have noticed 2 upward and 1 downward movements in the last 30 days.

For full-year 2012, there were no estimate revisions in the last 7 days. As far as last 30 days estimates revisions are concerned, 3 estimates moved upwards whereas 2 estimates went downwards.

Magnitude

In the last 7 days, the Zacks Consensus Estimate for third-quarter 2012 earnings remained unchanged at 65 cents per share. However, quarterly earnings estimate decreased by a penny to 65 cents from 66 cents in the last 30 days.

For full-year 2012, earnings per share as per the Zacks Consensus Estimate remained unchanged at $2.28 in the last 7 days and decreased by a cent to $2.28 from $2.29 in the last 30 days.

Surprise History

With respect to earnings surprises, Northeast Utilities has topped the Zacks Consensus Estimate in two quarters out of the last four quarters. Over the last four quarters, the surprise ranges from -17.65% to 7.25% with an average of -5.89%.

Our Recommendation

Northeast Utilities strongly follows organic as well as inorganic growth strategy. As a result of merger with NSTAR, the company has become one of the leading utility providers in the U.S. This merged entity continues to get benefit from increased scale of operations and a wide customer base, which subsequently enables it to achieve higher end of earnings growth in the near future.

As far as organic growth projects are concerned, the company intends to invest $1.7 billion under its full-year 2012 infrastructure spending programs for expansion and development of several major projects. We believe these projects will provide Northeast attractive earnings and cash flow growth over the coming couple of years.

However, we are skeptical about strict regulations, over-dependence on transmission and distribution businesses, and risks associated with delay and cancellation of several key projects.

Northeast Utilities currently has short-term Zacks #3 Rank (Hold rating).

Hartford, Connecticut and Boston, Massachusetts-based Northeast Utilities is a public utility holding company, which provides energy delivery services to residential, commercial and industrial customers in Connecticut, New Hampshire and Massachusetts. The company engages in the purchase, delivery, and sale of electricity.

With a market capitalization of $12.15 billion, Northeast has 6,063 full time employees. The company’s closest peer is NiSource Inc. ( NI - Analyst Report ) .