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ED Beats on Q3 Earnings, Ups View

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Consolidated Edison Inc. (ED - Free Report) posted third quarter 2013 earnings from ongoing operations of $1.48 per share, beating the Zacks Consensus Estimate of $1.41 by 5%. The quarterly result was also up 2.8% from the year-ago profit of $1.43 per share. The upside came on the back of higher sales.

Including the effects of its lease in/lease out transactions and the net mark-to-market effects of the competitive energy businesses (CEBs), the company registered GAAP earnings of $1.58 per share compared with $1.50 in the year-ago quarter.

Operational Results

Consolidated Edison reported revenues of $3,484.0 million, up 1.3% year over year. However, the top line missed the Zacks Consensus Estimate of $3,492.0 marginally by 0.2%. The results reflect rise in electric, gas and steam sales.

The company's largest top-line generator, Electric revenues were up 0.4%. Gas revenues increased 4.2% and Steam revenues were up 5.9%. Non-utility revenues increased 6.1% in the reported quarter.

The company achieved a new peak electricity delivery record of 13,322 megawatts in New York City and Westchester on Jul 19, 2013.

Con Edison's utility subsidiaries, Consolidated Edison Company of New York, Inc. (CECONY) and Orange and Rockland Utilities, Inc. (O&R), as of Sep 30 2013, incurred response and restoration costs for Superstorm Sandy of $471.0 million and $92.0 million, respectively (including capital expenditures of $143.0 million and $15.0 million, respectively).

Despite the cost cutting initiatives, total operating expenses were up 1.6% year over year to $2,629.0 million. Purchased power expenses increased 1.7% year over year.

Financial Update

Cash and temporary cash investments were $74.0 million, down from $394 million as of Dec 31, 2012. Long-term debt was $10,493.0 million, up from $10,062.0 million as of Dec 31, 2012.


Consolidated Edison increased its earnings from ongoing operations forecast for 2013 to a range of $3.70 to $3.80 versus its prior expectation of $3.65 to $3.85 per share.

Peer Reviews

Edison International’s (EIX - Free Report) adjusted earnings of $1.42 per share for the third quarter of 2013 were well ahead of the Zacks Consensus Estimate of $1.21 by 17.4% and the year-ago quarterly earnings of $1.00 by 42.0%. The upside was driven by robust cost management initiatives along with favorable tax benefits.

American Electric Power Company Inc. (AEP - Free Report) reported third quarter 2013 operating earnings of $1.10 per share, beating the Zacks Consensus Estimate of $1.08 by 1.9%. The quarterly figure also improved 7.8% from the year-ago profit of $1.02. This improved performance reflects positive returns from the investments made in the company’s regulated operations.

Our Take

Though the top line for Consolidated Edison marginally missed the Zacks Consensus Estimate, the bottom line succeeded in beating the mark. The company is focused on energy efficiency initiatives and aggressive oil-to-gas conversion program that will lower costs while improving air quality. Also, the company continues to invest heavily in infrastructure improvement.

However, we remain concerned about lower demand for electricity, earnings dilutive issuances and regulatory risks. Also, the current liquidity position poses a risk for the company. Consolidated Edison currently has a Zacks Rank #4 (Sell). In the near term, we would advise investors to accumulate its short-term Zacks Rank #1 (Strong Buy) peer UNS Energy Corp. .

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