Pepco Holdings Beats on Earnings, Affirms View - Analyst Blog

Pepco Holdings Inc. POM reported first-quarter 2014 adjusted earnings of 30 cents per share, outpacing the Zacks Consensus Estimate by 6 cents. Earnings also improved 25% year over year.

The bottom-line outperformance stemmed from increased electric distribution revenues resulting from robust infrastructure investment that drove rates. A decline in operation and maintenance expenses also helped results.

GAAP and adjusted earnings numbers were the same during the first quarter 2014.

Behind the Headlines

Pepco Holdings' total revenues in the first quarter were $1,330 million, up 12.7% from $1,180 million in the year-ago period. Quarterly revenues also comfortably surpassed the Zacks Consensus Estimate of $897 million.

Favorable weather acted as a demand catalyst which in turn spurred power sales in the first quarter. During the quarter, Pepco Holdings' total electric sales at Power Delivery were up 3.0% to 12,264 Gigawatt hours (GWh).

Total operating expenses in the quarter jumped 10.5% to $1,157 million from $1,047 million in the comparable year-ago period. The revenue upsurge eclipsed the cost inflation resulting in higher profitability.

The company booked an operating income of $173 million, up 30% from the year-ago period.

As of Mar 31, 2014, Delmarva Powers' installation and activation of electric smart meters are still underway in its Maryland service territory.  Both installations and activation of smart meters by Pepco Holdings in the District of Columbia and Maryland service zones have been concluded.

Financial Update

Pepco Holdings' cash and cash equivalents, including restricted cash, were $324 million as of Mar 31, 2014, increasing from $36 million as of Dec 31, 2013. Long-term debts as of Mar 31, 2014 were $4,452 million, up 9.8% from $4,053 million as of Dec 31, 2013.

Guidance

Pepco Holdings retained its 2014 earnings outlook in the range of $1.12 to $1.27 per share.

Other Company Releases

DTE Energy Company DTE reported first quarter 2014 operating earnings per share of $1.69, beating the Zacks Consensus Estimate by 19.9%.

Alliant Energy Corp. LNT posted first-quarter 2014 net operating earnings from continuing operations of 90 cents per share, surpassing the Zacks Consensus Estimate by 16.9%.

Public Service Enterprise Group Inc. PEG reported first-quarter operating earnings of $1.01 per share, beating the Zacks Consensus Estimate by 5.2%.

Our View

Pepco Holdings currently carries a Zacks Rank #4 (Sell).