Progress Energy (PGN) Beats, Ups Guidance

Power utility company Progress Energy Inc. (PGN) announced its second-quarter 2010 operating earnings of 63 cents per share, which beat the Zacks Consensus Estimate by a penny. The results of the company were lower than the year-ago earnings of 64 cents per share.

The contribution to operating earnings from Progress Energy Carolinas was 39 cents per share, while Progress Energy Florida contributed 41 cents. Ongoing after-tax expenses from Corporate and Other Business were 17 cents a share in the reported quarter.

GAAP earnings in the quarter were 62 cents per share, level with year-ago results.

The difference between GAAP earnings of 62 cents and operating earnings of 63 cents during the reported quarter stemmed from a 1-cent impact from impairments.

Total Revenue

Total revenue of the company at the end of the second quarter was $2,372 million versus $2,312 million in the year-ago quarter, reflecting growth of 2.6%. Reported results came in marginally higher than the Zacks Consensus Estimate of $2,365 million.

During the reported quarter, Progress Energy Carolinas contributed $1,117 million and Progress Energy Florida contributed $1,252 million to total revenue.

Energy Sales and Supply

Total electricity sales in the quarter were 25.01 billion kilowatt hours (KWh), up 2.3% from 24.44 billion KWh last year. Progress Energy Carolinas’ electricity sales totaled 13.95 billion KWh, up 1.9% year over year, while Progress Energy Florida sold 11.05 billion KWh, up 2.8% year over year.

Total energy supply in the quarter was 26.4 billion KWh, up 3.9% from 25.4 billion KWh last year, with Progress Energy Carolinas contributing 14.4 billion KWh (55% of total supply) and Progress Energy Florida the remaining 11.97 billion KWh (45% of total supply).

Operational Update

Operating expenses during the quarter were flat year over year. The cost of fuel used for electric generation decreased by 10% during the reported quarter to $743 million from $826.0 million in the year-ago quarter.

Operating income during the quarter increased to $440 million from $379 million reported in the year-ago quarter, given the top-line increase accompanied with no real change in operating expenses.

Financial Update

Cash and cash equivalents as of June 30, 2010, were $690 million versus $452 million as of June 30, 2009.

The total debt-to-capital ratio of the company at the end of second-quarter 2010 was 56.4% versus 56.6% in the year-ago period.


Progress raised its operating earnings guidance to a range of $2.95 to $3.05 per share from $2.85 to $3.05 per share earlier. The company raised the low end of the guidance by 10 cents to reflect the impact of favorable weather.

Our View

The increase in customer base in both Progress Energy Carolinas and Progress Energy Florida during the reported quarter as compared to the last is a positive sign for the company.

We appreciate the initiative of Progress to develop alternate energy sources and also to find out ways for effective utilization of energy. The Residential Lighting Program of the company aimed for effective utilization of power is expected to save 51 million kilowatt-hours per year.

We have a short-term Zacks #3 Rank (Hold) corresponding with a long-term Neutral recommendation on the stock.

PROGRESS ENERGY (PGN): Free Stock Analysis Report

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