Electric and natural gas utility company Pepco Holdings Inc. (POM) reported Friday a decline in fourth-quarter profit, hurt by lower revenues in its Power Delivery and Competitive Energy segments. The Washington, DC-based company's quarterly earnings per share, however, came in line with market projections.
Fourth-quarter consolidated earnings dropped to $41 million or $0.18 per share from $67 million or $0.32 per share for the fourth quarter of 2008. On average, seven analysts polled by Thomson Reuters expected the company to post earnings of $0.18 per share for the quarter. Analysts' estimate typically excludes one-time items.
The company attributed the decline in earnings mainly to lower Power Delivery earnings due to higher operation and maintenance expenses and lower distribution sales caused by mild weather. At Pepco Energy Services, higher capital costs led to lower earnings.
Total operating revenue for the latest quarter totaled $2.14 billion, lower than prior year's $2.48 billion.
Founded in 1896, Pepco, a diversified energy company, operates in two businesses, Power Delivery and Competitive Energy. Operating revenues from Power Delivery declined to $1.09 billion from $1.23 billion a year ago, and Competitive Energy fell to $1.04 billion from $1.24 billion in the previous year.
In its preceding third quarter, Pepco's profit increased from last year, as lower expenses helped offset a significant drop in revenue. On an adjusted basis, quarterly earnings decreased over the year-ago, due to increased pension expense and higher interest expense. The company posted net earnings of $124 million or $0.56 per share for the third quarter, compared to $119 million or $0.59 per share in the prior year quarter. Excluding special items, earnings would have been $97 million or $0.44 per share for the third quarter of 2009. Operating revenue declined to $2.54 billion from $3.06 billion in the same quarter last year.
Among peers, power generation and distribution company Allegheny Energy, Inc. (AYE) in early February reported a higher fourth-quarter profit, as income from regulated operations increased and unregulated generation business turned to a profit compared to the prior year quarter. The Greensburg, Pennsylvania-based company's fourth-quarter net income increased to $109.3 million or $0.64 per share from $16.2 million or $0.10 per share, a year ago. On a non-GAAP basis, net income increased to $112.7 million or $0.66 per share from $87.1 million or $0.51 per share in the year-earlier quarter. Revenues rose to $861.1 million from $707.8 million in the fourth quarter of 2008.
Constellation Energy (CEG) recently reported a profit for the fourth quarter, compared to a loss last year, helped by a huge gain from the sale of its stake in Constellation Energy Nuclear Group, LLC, or CENG, to Electricite de France. The Baltimore, Maryland-based company's net income applicable to common stock for the quarter was $4.421 billion or $21.96 per share, compared to a loss of $1.406 billion or $7.75 per share last year. Adjusted earnings for the quarter were $0.30 per share, compared to last year's adjusted earnings of $0.03 per share. Total revenues for the quarter dropped to $3.404 billion from $4.850 billion in the prior year.
For the fiscal year 2009, Pepco reported net income of $235 million or $1.06 per share, lower than last year's $300 million or $1.47 per share. Excluding certain special items, earnings for the full year fell to $200 million or $0.91 per share from $393 million or $1.93 per share in 2008. The company said the decrease, excluding special items, was driven primarily by lower Conectiv Energy and Power Delivery earnings.
Total operating revenue for the year dropped to $9.26 billion from $10.70 billion a year ago. Revenues from Power Delivery fell to $4.98 billion from $5.49 billion last year, and Competitive Energy revenues declined to $4.24 billion from $5.28 billion in the prior year.
Commenting on the results, Joseph Rigby, chairman, president and chief executive officer, stated, "2009 was a challenging earnings year given the pressures of the wholesale energy market, the economic downturn, and the impact of higher pension expense and capital costs principally incurred to support rate base growth not yet fully reflected in regulated rates. However, the year was also marked by steady progress on our key growth initiatives."
In a December 2 research note, Credit Suisse downgraded its rating on Pepco shares to 'Neutral' from 'Outperform' with a price target of $16. Analyst Eggers said that his downgrade is rooted in valuation and his view that sustained outperformance from current levels looks more difficult.
POM closed Thursday's regular trading session at $19.60, down $0.46, on a volume of 3.5 million shares. In the past 52 weeks, shares have been trading between $10.07 to $17.57.
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