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Public Service Enterprise Group Inc. or PSEG (PEG - Analyst Report) reported first quarter 2013 earnings of 85 cents per share, beating the Zacks Consensus Estimate of 74 cents by 14.9%. This was mainly attributable to increased investment at PSE&G and solid performance from PSEG Power segments. However, earnings were in line with the year-ago figure.

Total Revenue

Revenue in the reported quarter was $2,786.0 million, down 3.1% from the year-ago figure of $2,875.0 million and 6.4% from the Zacks Consensus Estimate of $2,976.0 million.

In the first quarter, the company registered a boost in both electric and gas sales volume. Electric sales volumes in the reported quarter increased 0.9% year over year to 9,923 million kwh, while gas sales volume were up 17.1% to 871 million therms.

Highlights of the Release

Total operating expenses were $2,176.0 million, up 4.0% from the year-ago level. The increase in total expenses was primarily due to a 13.1% year-over-year rise in operating and maintenance costs as well as a 13.3% jump in depreciation and amortization expenses.

Higher expenses compounded by a very weak top line led to lower operating income. As a consequence, operating income dropped 22.1% to $610.0 million.

Segment Performance

PSEG Power: Segment operating earnings were $250.0 million in the quarter, up from $196.0 million in the prior-year period. A solid energy market, higher capacity prices, and an increase in generation resulted in the upswing.

PSE&G: The segment generated operating earnings of $179.0 million, down 9.1% from the prior-year quarter. Results reflect the absence of tax settlement in the year-ago quarter that more than offset the positive contribution from capital investments.

PSEG Energy Holdings: Segment operating earnings were $4.0 million, down from the prior-year figure of $39.0 million.

Financial Update

Cash and cash equivalents as of Mar 31, 2013 were $420.0 million versus $379.0 million on Dec 31, 2012.

Long-term debt as of Mar 31, 2013 was $7,417.0 million versus $7,173.0 million at 2012 end.

Cash flow from operating activities was $877.0 million compared with $1,088.0 million in the first quarter 2012.

2013 Guidance

The company reaffirmed operating earnings per share for 2013 in the range of $2.25 to $2.50. The group expects the year to benefit from its proposed 10-year $3.9 billion Energy Strong investment program.

The company forecasts operating earnings from PSE&G to range from $580 million to $635 million, earnings from PSEG Power to range from $535 million to $600 million and PSEG Energy Holding/Energy to range from $25 million to $35 million.

Zacks Rank

The company currently has a Zacks Rank #3 (Hold). Stocks that look better positioned are Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report), CMS Energy Corporation (CMS - Analyst Report) and Empresa Nacional de Electricidad S.A. (EOC - Snapshot Report), all with a Zacks Rank #1 (Strong Buy).

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