Energy holding company, SCANA Corp. (NYSE: SCG) reported strong first-quarter 2014 results of $1.37 per share comfortably surpassing both the Zacks Consensus Estimate and the year-ago figure of $1.11. The upside came from higher margins boosted by an extremely cold first quarter, along with customer growth and rate base hikes.
The company's quarterly operating revenue increased 21.3% year over year to $1,590.0 million and also came above the Zacks Consensus Estimate of $1,315.0 million.
Segment Performance
South Carolina Electric & Gas Company (SCE&G): Quarterly earnings from this segment, SCANA's principal subsidiary, were 89 cents per share, up from the year-ago level of 68 cents. This was due to higher electricity cum gas margins, a Base Load Review Act rate increase, and customer growth. This was partially offset by increases in operations and maintenance expenses, higher property taxes, depreciation and share dilution.
As of Mar 31, 2014, natural gas and electric customers of SCE&G increased 2.4% and 1.3% from a year ago to 332,000 and 681,000, respectively.
PSNC Energy: This segment recorded earnings of 24 cents per share, flat year over year. As of Mar 31, PSNC Energy's customer base widened 2.3% year over year to 512,000.
SCANA Energy-Georgia: The segment – comprising SCANA's retail natural gas marketing business in Georgia – posted earnings of 16 cents per share, flat year over year.
Corporate and Other, Net: This business segment posted earnings of 8 cents per share versus 5 cents in the year-ago period.
Guidance
SCANA affirmed its full-year 2014 earnings guidance of $3.45–$3.65 per share.
Outlook
We expect SCANA to benefit from the new electric generation plants within its service territory and nuclear expansion projects, going forward. The company is a stable, relatively strong and regulated integrated electric utility, supported by favorable regional demographics and electric utility rate. On the flip side, we are apprehensive of the company's sensitivity to changes in coal, gas, oil and other commodity prices. Construction costs and delays could affect the timing of rate base growth, earnings, cash flow and balance sheet quality.
SCANA currently carries a short-term Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile one can consider other energy sector stocks such as Pioneer Energy Services Corp. (NYSE: PES), RSP Permian, Inc. (NYSE: RSPP) and Clayton Williams Energy, Inc. (NASDAQ: CWEI). All these stocks currently sport a Zacks Rank #1 (Strong Buy).
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