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Constellation earns 49 cents per share, but misses estimates

Profits at Constellation Energy Group Inc. climbed 37 percent in the second quarter based on strong performances at its core businesses, the company reported Wednesday.

Constellation reported earnings of $99.2 million, or 49 cents a share, compared to $72.6 million, or 36 cents a share, in the quarter last year.

Adjusted earnings, which do not include special items like merger-related expenses or discontinued operations, came out to 76 cents a share on revenue of $3.36 billion.

Constellation did not meet analysts’ expectations of earnings of 84 cents on revenue of $3.86 billion. Analysts generally do not include one-time costs in their estimates.

The Baltimore-based company, which has agreed to be acquired by Chicago-based Exelon Corp. in a $7 billion deal, said in a conference call with analysts that it plans on growing its competitive supply businesses as more and more customers choose to shop for their own power supplier.

“Retail choice is thriving,” Mayo A. Shattuck III, the company’s chairman, president and CEO, said on the call.

This is especially true in some mid-Atlantic states, as well as in Ohio and Illinois, where the company plans to expand its footprint following the completion of its merger.

In Maryland, about 3 percent of residential customers shopped for a power supplier in 2008. Today, about 250,000 of subsidiary Baltimore Gas & Electric Co.’s 1.1 million residential customers buy their power from a competitive supplier.

Paul Freemont, an analyst with Jefferies & Co. in New York, agreed that there are growth opportunities in several states.

“What they’re sort of pointing to is market growth in places like Ohio, where we’ve seen a significant increase of customer shopping over the last couple years,” he said. “I think Pennsylvania is a market that is perceived as growing. If you look at Maryland, I would say that’s probably a saturated market.”

Constellation lowered its earnings guidance range for the year by 5 cents, to $3.05 to $3.35 per share. The reduced guidance was the result of outages at the firm’s nuclear joint venture facilities that lasted longer than expected and recent acquisitions in the residential electricity market.

The company will not offer earnings guidance for 2012 because of its pending merger with Exelon.

Constellation and Exelon said they hope to complete their merger early in 2012. Shattuck said the regulatory filings have been completed and the state’s energy regulator, the Public Service Commission, is scheduled to finish its proceedings by January 2012.

Exelon and Constellation also announced Wednesday that the deal had been approved by the Public Utility Commission of Texas. In addition to the PSC, the acquisition must be approved by the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and the New York State Public Service Commission. The companies plan to seek approval from their shareholders in the third quarter.

Asked about discussions with state regulators and Gov. Martin O’Malley regarding the merger, Shattuck said it’s been a “quiet summer.” Maryland has put significant pressure on Constellation in past merger attempts.

“Obviously, our approach to this merger … has been substantially different” from one the company attempted five years ago, he said.

The talk, he said, has largely been around the offers the companies made to the state and BGE’s customers when the deal was announced: $100 bill credits for BGE customers; BGE employees would feel no impact for two years; and, charitable giving would remain at $10 million a year for a decade after the close of the deal.

Shares of Constellation’s stock gained 36 cents Wednesday, nearly 1 percent, to close at $38.21.

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