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American Electric Power Company Inc. (AEP - Analyst Report) posted adjusted first quarter 2013 operating earnings of 80 cents per share, which came in line with the Zacks Consensus Estimate as well as the year-ago profit.

The company witnessed solid residential and commercial sales during the quarter, stemming from positive regulated rate recovery. However, this was partly offset by weak industrial sales.

On a reported basis, the company registered earnings of 75 cents per share in the reported quarter versus 80 cents per share in the year-ago period. The variance of 5 cents between reported and operating numbers was due to a restructuring charge and the reversal of a storm cost deferral from a change in Virginia law.

Operational Performance

Quarterly revenue at American Electric Power was $3,826.0 million, higher than the Zacks Consensus Estimate of $3,746.0 million and the year-ago number of $3,625.0 million.

Segmental Performance

In the reported quarter, operating earnings from Utility Operations decreased 2.9% year over year to $372.0 million. This was due to customer switching in Ohio, partly offset by the favorable impact of successful rate proceedings and the impact of cold weather compared with mild temperatures last year.

Operating earnings from Transmission Operations rose more than 44% year over year to $13.0 million.

The company’s AEP River Operations registered an operating loss of $2.0 million in the reported quarter versus an operating income of $9.0 million in the year-earlier period. This was primarily due to the 2012 drought, which had significant impacts on river conditions and crop yields, resulting in reduced grain exports.

Operating earnings from Generation and Marketing, which includes American Electric’s non-regulated generating, marketing and risk management activities primarily in the Electric Reliability Council of Texas (ERCOT) area, increased to $7.0 million versus an operating loss of $1.0 million in the first quarter of 2012.

All Other, which includes the Parent Company and other investments, narrowed its operating loss to $3.0 million from $11.0 million in the year-ago quarter. The improvement was primarily attributed to the reduction in interest expense.

Financial Condition

American Electric Power ended the first quarter with cash and cash equivalents of $179.0 million and other cash deposits of $261.0 million. At year-end 2012, the company had $279.0 million in cash and cash equivalents and $324.0 million of other cash deposits. The company generated approximately $756.0 million of cash from operating activities in the reported quarter versus $876.0 million in the same period last year. Long-term debt increased to $15,899.0 million at the end of the reported quarter from $15,586.0 million at the end of full year 2012. The debt-to-capitalization ratio was 50.8% at the end of first quarter 2013.

Guidance

American Electric Power maintained its 2013 operating earnings in the range of $3.05 to $3.25 per share.

Zacks Rank

American Electric Power currently retains a Zacks Rank #3 (Hold). Stocks in the energy sector worth considering are Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report), Empresa Nacional de Electricidad S.A. (EOC - Snapshot Report) and Pike Electric Corporation (PIKE - Snapshot Report), all with a Zacks Rank #1 (Strong Buy).

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