Tags: Public | Service | Enterprise | profit

Public Service Enterprise Faces Profit Drop

By    |   Tuesday, 11 Oct 2011 12:52 PM

Public utility holding company Public Service Enterprise Group (PEG) does not appear to acknowledge what is obvious from the company's earnings reports and future earnings estimates: The utility’s level of net profit is forecast to drop for at least a couple of years.

Public Service Enterprise Group, known as PSEG, is a holding company comprised primarily of Public Service Electric and Gas Company, a New Jersey regulated utility, and PSEG Power, an unregulated power generation company. PSEG Power owns gas, coal and nuclear power generation facilities and wholesales power into the eastern United States. Also included under the holding company is PSEG Energy Holdings, which invests in alternate energy projects.

For the 2011 second quarter, PSEG reported operating earnings of $301 million or 59 cents per share, down from $321 million, or 62 cents per share. The Wall Street consensus estimate was earnings per share of 55 cents, so the company did beat the consensus estimate with a less-than-expected earnings decline.

Unregulated results

Management guidance for full year results show the decline in earnings is the result of reduced results from the unregulated PSEG Power company.

In 2010, PSEG Power generated $1.1 billion in operating earnings. For 2011, management has forecast earnings from Power of between $765 and $855 million. The results for PSEG Energy Holdings also are forecast to decline to about break-even from a profit last year of $49 million.

The result of the expected earnings shortfalls in these companies is earnings guidance in the range of $2.50 to $2.75 per share. PEG earned $3.09 per share in 2009 and $3.12 in 2010. The consensus estimate for 2012 is earnings of just $2.52.

The current dividend rate for PEG is $1.37 per year. Current and estimated future earnings indicate enough coverage to maintain this level of payout, but investors should not expect a dividend increase nor be surprised if the payout is reduced.

Recently, the analysts at both UBS and Macquarie downgraded PEG to neutral from their respective buy and outperform ratings. Goldman Sachs has maintained its buy rating with an increase in the forecast earnings per share.

The company reports next on Oct. 27.

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Public utility holding company Public Service Enterprise Group (PEG) does not appear to acknowledge what is obvious from the company's earnings reports and future earnings estimates:The utility s level of net profit is forecast to drop for at least a couple of...
Public,Service,Enterprise,profit
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2011-52-11
Tuesday, 11 Oct 2011 12:52 PM
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