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PSEG Beats Earnings, Lags Revs

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Public Service Enterprise Group Inc. or PSEG (PEG - Free Report) reported strong fourth quarter 2013 as well as 2013 results backed by its increased focus on regulated business. The company’s fourth quarter operating earnings were 49 cents per share, beating with the Zacks Consensus Estimate of 47 cents by 4.3%. Earnings were also up 19.5% from the year-ago profit of 41 cents.

Full year 2013 earnings surged 5.7% year over year to $2.58 per share, surpassing the Zacks Consensus Estimate by 3 cents.

Total Revenue

Revenue in the reported quarter was $2,318.0 million, down 3.7% from the year-ago figure of $2,406.0 million. Revenue was also below the Zacks Consensus Estimate by $212.0 million.

During the fourth quarter, Electric sales volume increased 3.9% year over year to 9,640 million kwh, while gas sales volume was up 34.0% to 1,274 million therms.

For full year 2013, total revenue edged up 1.9% year over year to $9,968.0 million. However, the year-end figure failed to meet our expectation of $10,322.0 million.

Highlights of the Release

Total operating expenses were $1,953.0 million, up 0.8% from the year-ago level. The marginal increase in total expenses was primarily due to a 14.1% rise in depreciation and amortization expenses and 8.2% rise in operation and maintenance expenses, partially offset by an 8.3% decline in energy costs.

The increase in total revenues was more than offset by higher expenses, resulting in an operating income of $365.0 million, down approximately 22.0% year over year.

Segment Performance

PSEG Power: Segment operating earnings were $115.0 million in the quarter versus $126.0 million in the prior-year period. The results reflect higher operating and maintenance expense associated with outage related work.

PSE&G: The segment generated operating earnings of $144.0 million, up considerably by 92.0% year over year. The results were driven by an increase in revenue related to a greater level of capital investment.

PSEG Energy Holdings: The segment registered an operating loss of $11.0 million compared with earnings of $6.0 million in fourth quarter 2012. The results reflect the continued monetization of assets within Holdings’ portfolio and the absence of gains on an asset sale in the year-ago quarter.


The company expects its earnings to fall in the range of $2.55–$2.75 per share for 2014. The Zacks Consensus Estimate for 2014 is $2.48.

At the Peer

PG&E Corporation’s (PCG - Free Report) adjusted operating earnings per share of 42 cents in the fourth quarter of 2013 were ahead of the Zacks Consensus Estimate of 40 cents, backed by higher rate base earnings. However, the reported figure came in below the year-ago figure of 59 cents by 28.8% due to lower regulated return on equity and debt compared to last year and a higher number of shares outstanding.

Duke Energy Corp. (DUK - Free Report) reported adjusted fourth quarter 2013 earnings of $1.00 per share, ahead of the Zacks Consensus Estimate of 94 cents by 6.4%. Quarterly earnings were also above the year-ago figure by 30 cents.

American Electric Power Company Inc. (AEP - Free Report) reported fourth quarter 2013 operating earnings of 60 cents per share, beating the Zacks Consensus Estimate of 56 cents by 7.1%. The quarterly figure also improved 20% from the year-ago profit of 50 cents.

Our Take

Public Service Enterprise Group posted mixed results in the fourth quarter with the top line beating the Zacks Consensus Estimate while the bottom line coming in below the expectation.

Going forward, the company’s solid portfolio of regulated and non-regulated utility assets will help to maintain a stable earnings base and substantial long-term growth potential. However, increasing cost of coal, higher pension & financial costs and power-price volatility are matters of concern.  The company currently has a Zacks Rank #3 (Hold).

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