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Why Is PSEG (PEG) Down 1% Since Last Earnings Report?

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It has been about a month since the last earnings report for PSEG (PEG - Free Report) . Shares have lost about 1% in that time frame, outperforming the S&P 500.

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

Public Service Enterprise Q1 Earnings Beat Estimates

Public Service Enterprise, or PSEG, reported first-quarter 2019 adjusted operating earnings of $1.08 per share, which surpassed the Zacks Consensus Estimate of 99 cents by 9.1%. Moreover, the bottom line increased 11.3% on a year-over-year basis.

Excluding one-time adjustments, the company reported quarterly earnings of $1.38 per share compared with $1.10 in first-quarter 2018.

Total Revenues

Revenues of $2,980 million in the quarter exceeded the Zacks Consensus Estimate of $2,780 million by 7.2%. Moreover, the figure improved 5.7% from the year-ago quarter’s figure of $2,818 million.

In the reported quarter, electric sales volumes were 9,908 million kilowatt-hours, while gas sales volumes rose 12% to 1,600 million therms.

Under Electric sales, Residential sales volumes were 3,012 million kilowatt-hours, whereas Commercial and Industrial sales volumes accounted for 6,719 million kilowatt-hours.

Total gas sales volumes witnessed a 58% surge in non-firm sales volumes of gas and 4% rise in firm sales volumes of gas.

Highlights of the Release

During the first quarter of 2019, the company reported operating income of $786 million, down from $832 million in the year-ago quarter. Total operating expenses were $2,194 million, up 10.5 % from the year-ago quarter.

Interest expenses in the reported quarter were $133 million compared with $103 million in the year-ago quarter.

Segment Performance

PSE&G: Segment earnings were $403 million, up from $319 million in the prior-year quarter. PSE&G’s results were driven by new transmission and distribution rates in effect, a reduction in operating and maintenance (O&M) expenses, and a reduction in the utility’s effective tax rate to reflect the flow back of tax reform benefits to customers.

PSEG Power: Segment income was $296 million compared $234 million a year ago. The upside can be attributed to increase in capacity revenues and increase in sales volumes.

PSEG Enterprise/Other: Segment income was $1 million compared with $5 million in the first quarter of 2018.

Financial Update

Long-term debt as of Mar 31, 2019, was $14,116 million, up from the 2018-end level of $14,462 million.

PSEG generated $1,218 million in cash from operations at the end of first-quarter 2019, down from the year-ago quarter’s $1,140 million.

2019 Guidance

The company has reaffirmed its 2019 guidance. Adjusted earnings are projected to be $3.15-$3.35 per share.

PSE&G’s operating earnings are anticipated to be $1.200-$1.230 million. The company expects PSEG Power operating earnings to be $395-$460 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.48% due to these changes.

VGM Scores

At this time, PSEG has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions 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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