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POM Lags Earnings Est., Guidance Intact

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Pepco Holdings Inc. reported first quarter 2013 earnings from continuing operations of 24 cents per share, a penny lower than the Zacks Consensus Estimate. However, earnings were 9.1% higher than the year-ago number of 22 cents.

The year-over-year increase in operating earnings was primarily due to higher electric distribution revenue partially offset by higher operation and maintenance expenses.

Loss per share, as per GAAP, was $1.82 versus earnings of 28 cents in the first quarter of 2012. The difference between GAAP and operating earnings during the reported quarter was due to a charge of $1.64 per share from cross border energy lease and a charge of 43 cents from certain deferred tax assets and a gain of 1 cent  from cross-border energy lease earnings, exclusive of charges.

Total Revenue

Total revenue at the end of the first quarter was $0.85 billion, down 31.4% from $1.24 billion in the year-ago period. Quarterly revenue also fell short of the Zacks Consensus Estimate of $1.32 billion by 35.4%.

The year-over-year decline was primarily due to lower contribution from Pepco Energy Services which declined 45.5%. This was offset partially by better performance from Power Delivery which grew 6.5%.

Highlights of the Release

In first quarter, total electric sales, at Power Delivery, increased 4.9% to 11,905 gigawatt hours (GWh). The harsh winter weather in its service territories increased demand for electricity.

Total operating expenses at the end of the quarter declined 2.1% from the comparable year-ago period.

Pepco Holdings continued with its initiatives to implement smart meters in its service territories. Pepco completed installing 98% of its smart meters in its District of Columbia service territory, while Delmarva Power installed and activated smart meters in its Delaware electric service territory.

Financial Update

Cash and cash equivalents, including restricted cash, were $135 million as of Mar 31, 2013, substantially higher than $35 million as of Dec 31, 2012.

Long-term debts as of Mar 31, 2013 were $3.89 billion, down 6.9% from $3.64 billion as of Dec 31, 2012.


Pepco Holdings reaffirmed its 2013 earnings guidance in the range of $1.05 to $1.20 per share. The guidance assumes normal weather during the year.

Other Company Releases

Exelon Corporation (EXC - Free Report) reported earnings of 70 cents per share in the first quarter of 2013, surpassing the Zacks Consensus Estimate by 2 cents.

CMS Energy Corporation (CMS - Free Report) announced first-quarter 2013 operating earnings of 53 cents per share, 15.2% above the Zacks Consensus Estimate of 46 cents.

Public Service Enterprise Group Inc. (PEG - Free Report) reported first quarter 2013 earnings of 85 cents per share, up 14.9% from the Zacks Consensus Estimate of 74 cents.

Our View

Pepco Holdings’ earnings improved from the prior year, thanks to its continuous investment in upgrading its infrastructure. A harsh winter in its service territory also drove demand for electricity.

Pepco Holdings still has a few pending rate cases and, since the outcome of the same is uncertain, visibility on 2013 performance is low. However, the company was able to marginally increase its regulated electric and gas customer base from the year-ago quarter.

Based in Washington, District of Columbia, Pepco Holdings, through its two operating divisions, Power Delivery and Competitive Energy, is engaged in the transmission and distribution of electricity, as well as delivery and supply of natural gas.  Pepco Holdings currently retains a Zacks Rank #3 (Hold).

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