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American Electric Power’s 1Q16 Earnings: EPS Fell by 20%

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May. 2 2016, Published 9:32 p.m. ET

AEP reports lower earnings

American Electric Power (AEP) reported its first quarter earnings on April 28, 2016. It missed its earnings as well as its revenue estimates by analysts for the quarter. American Electric Power earned $1.02 per share in 1Q16 compared to $1.28 per share in 1Q15.

American Electric Power’s earnings for the quarter fell more than 20%, driven by poor sales in the residential customer category and lower power prices. Positive outcomes from the rate cases and effective hedging positively impacted earnings in the reported quarter.

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Earnings highlights

American Electric Power’s total revenues in the quarter came in at $4 billion, missing analysts’ estimates. It reported revenues of $4.7 billion in the same quarter last year. Warm winter resulted in lower power usage, particularly in the Residential segment, which drove the fall in its revenues. The weather pulled down the earnings by $0.12 compared to 1Q15.

AEP surprisingly witnessed an increase in its Commercial and Industrial sales, which partially offset the fall in its Residential sales. AEP’s normalized load growth year-over-year stayed more or less flat.

AEP’s principal operating segment, Vertically Integrated Utilities, reported 20% fall in operating earnings due to lower demand and higher operating and maintenance expenses during the quarter. Transmission and Distribution Utilities earnings rose due to favorable rate changes. Generation and Marketing segment’s operating earnings decreased from $187 million in 1Q15 to $70 million in 1Q16 due to lower margins and lower capacity revenues.

Warmer weather is expected to significantly influence earnings for utilities (JXI) in 1Q16. Southern Company (SO) and Public Service Enterprise (PEG) reported lower earnings than their previous comparable quarter due to unfavorable weather conditions. Bigger players Duke Energy (DUK) and Dominion Resources (D) are expected to report on May 3 and May 4, respectively.

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