Despite relatively low demand for electricity, Public Service Enterprise Group
Operating earnings landed at $0.63 a share, in line with analyst estimates and up slightly from $0.61 in the year-ago quarter. Meanwhile, the company reported earnings from continuing operations of $0.61 per share, reversing a year-ago loss of $0.29. Revenue grew only slightly to $2.56 billion, since PSEG's power generation declined during the period. Uncharacteristically cool weather in June and reduced demand linked to the weak economic environment kept the utility's generators underworked.
Focusing on the bottom line
Lower costs definitely helped bail PSEG out of a would-be mediocre quarter. Year over year, the six-month cost structures for its PSEG Power subsidiary show significant reductions.
In particular, while total generation fell by less than 15% during the second quarter, cost per megawatt hour dropped by more than half. Some of that savings came from lower fossil fuel prices. But PSEG's low-cost nuclear plants played a big role, too; they met 62% of the company's generation requirements, compared with 52% in 2008.
PSEG also made headlines last week after receiving the go-ahead from New Jersey utility regulators to spend $515 million over the next three and a half years installing pole-mounted solar panels across the state. PSEG will pay for the panels with a mix of higher rates and federal and state tax credits.
The project should generate 80 megawatts of electricity, capable of powering roughly 640,000 households. It will also help the company achieve its continuing goals of reducing greenhouse gas emissions.
Shares didn't respond well to the earnings report, dropping almost 3% on Friday. That erased the gains earlier in the week from the positive solar-panel news.
Frankly, I'm not surprised. Even after the drop, the stock still trades at 14 times trailing EPS, a fairly big premium over competitors First Energy
As a business, I like PSEG, and the shares could be attractive if their price fell substantially. The company has a solid governance rating, and it currently sports a 4% dividend yield. If its earnings multiple comes down in line with its peers, PSEG could be worth another look.
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Fool contributor Chris Jones does not own shares of any company mentioned in this article … c'est la vie! Try any of our Foolish newsletter services free for 30 days. They bought a souped up jitney, 'twas a cherry in fifty-three. They drove it down to New Orleans, with The Motley Fool's disclosure policy.