Tags: US | Earns | AEP

American Electric Power's Earnings Drop 4 Percent

Thursday, 29 April 2010 08:06 AM

American Electric Power said Thursday its first-quarter profit dropped 4 percent as the lingering effects of the recession continue to hurt power demand.

AEP posted a profit of $344 million, or 72 cents share, for the three months ended March 31 compared with $360 million, or 89 cents per share, in the year-ago quarter. Without one-time charges the company would have earned $365 million, or 76 cents per share, for the latest quarter.

Like other power companies, AEP has struggled with lower power demand because of the recession. The company said it is seeing signs of economic improvement, but that has yet to be followed by a broad increase in electricity demand.

As one of the nation's biggest power companies, with 5.2 million customers from Michigan to Texas, what AEP says about power demand is a reflection on how the broader economy is performing.

Revenue increased to $3.6 billion from $3.5 billion in the year-ago quarter.

AEP recorded a $21 million charge because of the recently enacted federal health care overhaul. AEP and other companies currently receive a government subsidy to keep prescription drug benefits for retirees. They have been able to deduct their expenses, but that ends in 2013 under the recently passed legislation.

Companies are announcing the charges now because accounting rules say they have to book them during the period a new law is enacted.

The company's per share profit for the quarter was reduced by 13 cents from a year ago because the company issued additional shares in 2009.

The company said residential sales rose 8.6 percent in the quarter, but commercial and industrial sales fell by 1.2 and 1 percent, respectively. Industrial consumption has been especially weak. It fell 16 percent last year as automakers and steel companies cut production and scaled back operations, but AEP said it is no longer seeing steep declines.

Despite the profit decline, AEP called the results "strong." Mike Morris, AEP's chairman, president and CEO, credited higher rates, increased off-system sales and a colder-than-normal winter.

"For several quarters we've been seeing some signs of economic improvement in the states that we serve, but the signs have yet to be followed by a broad increase in electricity demand that typically accompanies economic improvement," he said.

To make up for sluggish demand, AEP is working to cut costs. The company has announced a buyout to cut its work force by up to 10 percent.

Because of the cost-cutting efforts, AEP reaffirmed its earnings guidance of $2.80 to $3.20 per share for the year.

Analysts surveyed By Thomson Reuters expects AEP to report profit of $3.23 per share.

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American Electric Power said Thursday its first-quarter profit dropped 4 percent as the lingering effects of the recession continue to hurt power demand. AEP posted a profit of $344 million, or 72 cents share, for the three months ended March 31 compared with $360 million,...
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2010-06-29
Thursday, 29 April 2010 08:06 AM
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