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PSEG (PEG) Up 2.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for PSEG (PEG - Free Report) . Shares have added about 2.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PSEG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Public Service Enterprise Q2 Earnings Beat, Rise Y/Y

Public Service Enterprise Group or PSEG reported second-quarter 2018 adjusted operating earnings of 64 cents per share, which exceeded the Zacks Consensus Estimate of 62 cents by 3.2%. Earnings also improved 3.2% on a year-over-year basis.

Excluding one-time adjustments, the company reported GAAP earnings of 53 cents per share compared with 22 cents in second-quarter 2017.

Total Revenues

Revenues of $2,016 million in the quarter missed the Zacks Consensus Estimate of $2,370 million by 14.9%. Moreover, revenues decreased 5.9% from the year-ago figure of $2,142 million.

During the reported quarter, electric sales volume increased 2.1% to 9,783 million kilowatt-hours but gas sales volume marginally declined 0.2% to 690 million therms.

For electric sales, results reflected a 2% rise in the commercial and industrial sector, 2.2% rise in residential sector and a 4% improvement in street lighting. However, sales dropped 1.8% in interdepartmental sector.

Total gas sales volume in the reported quarter declined 23.7% in non-firm sales volume of gas and rose 24.8% in firm sales volume of gas.

Highlights of the Release

During the second quarter, the company has an operating income of $411 million compared to that of $195 million in the year-ago quarter. Total operating expenses were $1,605 million, down 17.6% from the year-ago quarter figure.

Interest expenses in the reported quarter were $111 million, up from $91 million posted in the year-ago quarter.

Segment Performance

PSE&G: Segment earnings were $231 million, up from $208 million in the prior-year quarter. Quarterly results reflect continued successful execution of its infrastructure investment programs and ongoing control of operating expenses.

PSEG Power: The segment’s earnings were $41 million against a loss of $97 million a year ago. Lower depreciation from cost savings associated with the early retirement of Hudson and Mercer generating stations, along with lower interest, helped in improving the segment’s income. Also, a reduction in the corporate tax rate from the Tax Cut and Jobs Act, and other tax items improved income for this segment.

PSEG Enterprise/Other: The segment incurred net loss of $3 million compared to a net loss of $2 million in the second quarter of 2017.

Financial Update

Long-term debt as of Jun 30, 2018, was $14,060 million, up from the 2017-end level of $13,068 million.

Public Service Enterprise Group generated $1,633 million in cash from operations in the first half of the year, down from the year-ago figure of $1,755 million.

2018 Guidance

The company reiterated its 2018 guidance. Adjusted earnings are still projected in the range of $3.00-$3.20 per share.

PSE&G’s operating earnings are still anticipated in the range of $1,000-$1,030 million. The company continues to expect PSEG Power operating earnings guidance in $485-$560 million band.

Additionally, PSEG Enterprise/Other’s operating earnings expectations are still projected at $35 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, PSEG has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our style scores.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, PSEG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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