PPL Q3 Profit Plummets On Charges; Adj. Earnings Beats View; Backs FY09 Forecast

10/29/2009 10:35 AM ET

(RTTNews) - Energy and utility holding company PPL Corp. (PPL), Thursday, reported a slump in profit for the third quarter, hit by charges related to hedging and income tax matters, as well as an impairment for the pending sale of assets. Adjusted earnings came in ahead of analysts' consensus estimate, while revenues fell short. Looking ahead, PPL reiterated its earnings outlook for fiscal years 2009 and 2010.

Cooler third-quarter weather and reduced power demand during the economic downturn have hurt utility companies. Utility is one of the areas that the Obama Administration wants to strengthen, with the creation of a Smart Grid, making use of smart meters and load-controllers. President Barack Obama had announced a $3.4 billion federal investment, most of which would go to utilities to install meters, transformers and other equipment that can control the flow of electricity and reduce power use and homeowner bills.

The Allentown, Pennsylvania-based company's net income attributable to PPL for the quarter plunged to $20 million or $0.05 per share from $203 million or $0.54 per share in the year-ago quarter.

The results for the third quarter include special item charges of $0.47 per share, $0.34 per share related to certain economic hedge activity, $0.07 per share related to a change in the method of accounting for certain expenditures for income tax purposes, and $0.06 per share for additional tax expense related to the 2007 sales of its Latin American businesses.

Excluding one-time items, earnings from ongoing operations for the quarter rose 16% to $195 million or $0.52 per share from $168 million or $0.45 per share in the year-ago quarter.

On average, six analysts polled by Thomson Reuters expected the company to earn $0.45 per share for the quarter. Analysts' estimates typically exclude one-time charges and gains.

In the preceding second quarter, PPL reported a net loss attributable to PPL of $7 million or $0.02 per share, compared to net earnings of $190 million or $0.50 per share in the prior year quarter.

Operating revenues for the recent third quarter slumped to $1.81 billion from $3.00 billion in the same period last year. Street analysts' had a consensus revenue estimate of $2.99 billion for the quarter.

For the preceding second quarter, operating revenues increased to $1.67 billion from $1.01 billion reported in the same period last year.

Segment wise, for the third quarter, the company's supply business segment earnings from ongoing operations increased, while Pennsylvania delivery business segment earnings from ongoing operations declined, primarily due to lower delivery revenues, resulting from the impacts of weather and the economy, and higher financing costs. Earnings from ongoing operations for PPL's international delivery business segment declined, reflecting the net result of higher U.K. and U.S. income taxes, less favorable currency exchange rates and lower financing costs.