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Dominion Resources (D) Q1 Earnings In Line, Keeps '16 View

Dominion Resources Inc. D reported first-quarter 2016 operating earnings of 96 cents per share, in line with the Zacks Consensus Estimate. Earnings were within the guidance range of 90 cents to $1.05 per share.

Earnings decreased 3% from 99 cents per share a year ago. The decline was primarily due to mild weather in its service territories and the absence of a farmout agreement.


GAAP earnings were 88 cents per share compared with 91 cents per share in the year-ago quarter. The difference between GAAP and operating earnings in the reported quarter was due to one-time adjustments of 8 cents.

Total Revenues

Dominion’s operating revenues of $2,921 million in the first quarter missed the Zacks Consensus Estimate of $3,407 million by 14.3%. Revenues also decreased nearly 14.8% year over year.

Highlights of the Release

Total operating expenses in the quarter decreased 15.1% year over year to $1,972 million. The decline in total expenses was primarily due to a 52.4% drop in the cost of purchased gas and a nearly 27% decline in electric fuel and other energy-related expenses.

Interest and related charges in the reported quarter were $224 million, up 0.5% from the year-ago quarter.

Dominion Virginia Power recorded 0.9% year-over-year growth in its customer base. However, warmer temperatures led to a 7.5% year-over-year decline in electricity sales volume to 21,166 Gwh in the first quarter.

Segment Update

Dominion Virginia Power recorded a net income of $120 million or 24 cents per share in the first quarter of 2016, down 14.3% year over year.

Dominion Energy recorded earnings of $186 million or 31 cents per share, down 18.1% year over year.

Dominion Generation’s earnings were $245 million or 41 cents per share, down 6.5% year over year.

Corporate and Others improved to $21 million or 4 cents per share from a year-ago loss of $45 million or 8 cents per share.

Financial Update

Dominion exited first-quarter 2016 with cash and cash equivalents of $218 million, up from $607 million as of Dec 31 2015.

Long-term debt as of Mar 31, 2016, was $24.1 billion compared with $23.5 billion at the end of 2015.

Cash from operating activities in first-quarter 2016 was $1.19 billion, up 5.3% from $1.13 billion in the year-ago period.

Looking Ahead

Dominion expects to generate second-quarter 2016 operating earnings in a range of 65 cents to 75 cents per share. Earnings in the year-ago period were 73 cents per share.

Dominion reaffirmed the earnings guidance for 2016 in the range of $3.60 to $4.00 per share. 2016 earnings are expected to benefit from additional revenues from its growth projects, lower capacity expenses, higher capacity performance revenues and investment tax credits from its solar facilities.

Other Company Releases

PPL Corporation PPL reported first-quarter 2016 adjusted earnings of 67 cents per share, falling short of the Zacks Consensus Estimate of 75 cents by 10.7%.

NextEra Energy, Inc. NEE reported first-quarter 2016 adjusted earnings of $1.55 per share, outpacing the Zacks Consensus Estimate of $1.38 by 12.3%.

American Electric Power Co., Inc. AEP reported first-quarter 2016 operating earnings of $1.02 per share, missing the Zacks Consensus Estimate of $1.06 by 3.8%.
Our View

Dominion’s earnings were in line with expectation. However, milder weather led to a year-over-year decline in earnings.

The company is nonetheless well poised with regard to organic and inorganic growth strategies. Construction of the 1,358-megawatt natural gas combined-cycle facility and the Cove Point liquefaction project are progressing as per schedule and budget. These projects will help in the long-term earnings growth of the company. The extension of the investment tax credit will also benefit Dominion’s solar facilities.

In the reported quarter, Dominion served more customers across all customer classes than the year-ago quarter, the only exception being industrial. Overall, customer volume increased 0.9% year over year, which will definitely have a positive impact on Dominion’s performance in the future.

Dominion Resources holds a Zacks Rank #3 (Hold).

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