American Electric Power (AEP) Soars

American Electric Power Company Inc. (AEP) reported strong second quarter fiscal 2010 results. In the reported quarter, the company eclipsed the Zacks Consensus Estimate of 69 cents by 5 cents with EPS of 74 cents. The company’s results also climbed from the year-ago quarterly EPS of 68 cents.

On a reported basis, including one-time items, earnings came in at 28 cents in the reported quarter, down significantly from 67 cents in the year-ago quarter. Reported earnings were largely affected by the charges incurred for the cost reduction and restructuring program implemented in May 2010, as well as the disallowance by the Virginia State Corporation Commission of the recovery of $54 million related to the Mountaineer Plant carbon capture and storage project ($34 million net of tax).

Operational Performance

Quarterly revenue at American Electric Power rose 6% to $3.4 billion from $3.2 billion last year. However, this came in below the Zacks Consensus Estimate of $3.5 billion. American Electric Power’s ongoing earnings also grew 11% year over year to $355 million in the quarter.

Retail electricity sales volumes of 41.1 billion kWh in the quarter rose 5% compared to 39.2 billion kWh sold in the prior-year quarter. This was mainly due to strong sales across all contributing sections. Electric sales volumes for residential, commercial and industrial sections grew 2.2%, 3.2% and 9.4%, respectively, accompanied by a 1.6% rise in miscellaneous electric sales.

Wholesale electricity sales volumes, however, declined 2.1% year over year to 7.0 billion kWh.

Segmental Performance

Ongoing earnings from Utility Operations increased $22 million to $348 million in the reported quarter. The improvement was driven by a favorable impact of rate changes and constructive weather throughout its utility service territory, offset by reduced marketing and trading activity.

Ongoing earnings from AEP’s River Operations were poor compared to the year-ago period. However, ongoing earnings from the Generation and Marketing segment increased $3 million in the quarter to $7 million. This was due to improved wind farm earnings.

All Others, which includes the parent company and other investments of the company, was at break-even compared to a loss of $10 million last year. The improved position was due to higher investment income.

Outlook

American Electric Power reaffirmed its ongoing earnings guidance range for fiscal 2010 in the range of $2.80 to $3.20. The Zacks Consensus Estimate for fiscal 2010 is presently $3.03 per share.

AMER ELEC PWR (AEP): Free Stock Analysis Report

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