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PSEG tops earnings expectations in Q2; Edison International falls short

Most of the largest investor-owned power companies by market capitalization in the U.S. and Canada exceeded analyst earnings expectations during the second quarter of 2020, according to S&P Global Market Intelligence data.

New Jersey-headquartered Public Service Enterprise Group Inc. reported non-GAAP operating earnings of 79 cents per share, beating the consensus estimate of 60 cents per share by 31.7%.

PSEG management aims to transition the company into a primarily regulated electric and gas utility in hopes of decreasing earnings volatility. It is currently exploring strategic alternatives for the non-nuclear generating fleet of its competitive business PSEG Power LLC.

PSEG affirmed operating earnings guidance at $3.30 per share to $3.50 per share for 2020. The consensus estimate for the full year is $3.36 per share.

In an Aug. 28 investor note, Ford Equity Research characterized PSEG's earnings strength as positive, noting "acceleration in quarterly growth rates when adjusted for the volatility of earnings."

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Exelon Corp. ranked second in topping analyst expectations during the quarter, despite reporting lower second-quarter earnings of 55 cents per share. This beat the normalized EPS estimate of 43 cents per share by 27.9%.

But a political bribery scandal involving its Illinois utility Commonwealth Edison Co. overshadowed the company's broader quarterly performance. During the Aug. 4 earnings call, Exelon President and CEO Chris Crane apologized for the utility's inappropriate actions and pledged to take "every possible step" to regain trust in the state.

Analysts are concerned the related prosecution agreement could affect Exelon Generation Co. LLC's push for legislation to procure its own capacity in Illinois. Crane acknowledged this, but said Exelon remains committed to the capacity market design and is working to engage with stakeholders.

DTE Energy Co. also beat earnings estimates by a wide margin. Citing strong performance across its businesses, the company reported higher operating earnings of $1.53 per share, compared with the normalized consensus estimate of $1.28 per share.

President and CEO Jerry Norcia told analysts that 2020 is shaping up to be a "strong" year for DTE. The company is seeing electric load return and estimates that the pandemic's full-year impact on electric sales will be less than what executives predicted on the first-quarter call.

CFRA Equity Research forecast DTE's revenues to rise 5.4% in 2020 compared with a 10.9% decline in 2019. "We see 2020 revenues rising due to multiple partial year electric and gas rate increases, growth in the number of customers, a gas infrastructure investment cost recovery mechanism, and a slowly improving economy," analyst Paige Meyer said in an Aug. 29 investor note.

Meanwhile, Edison International ranked last on the list after missing the consensus estimate by 10.7%. Second-quarter core earnings were $1 per share, compared to the consensus estimate of $1.12 per share.

While quarterly earnings were down year over year, the company is making progress at settling weather wildfire litigation involving utility Southern California Edison Co., reaching deals with 23 public government entities and a few dozen individuals. Edison International, however, said it still cannot ascertain total litigation costs, given the number of plaintiffs.

Edison International narrowed its 2020 earnings guidance range to $4.37 per share to $4.62 per share. The S&P Capital IQ normalized consensus estimate for the year is $4.43 per share.

Eversource Energy also failed to beat analyst expectations in the quarter. The company reported higher earnings of 75 cents per share, but missed the consensus estimate of 78 cents per share.

Results for the quarter include charges related to the company's pending $1.1 billion acquisition of Columbia Gas of Massachusetts. Eversource expects the transaction to be accretive to its shareholders in 2021.

The company reaffirmed its 2020 earnings guidance of between $3.60 per share and $3.70 per share.

"The company's second quarter results continue to demonstrate that Eversource's financial results are not being greatly affected the COVID-19 pandemic. However, based on year-to-date earnings, the [Connecticut Public Utilities Regulatory Authority] action on July rates, the effects of the COVID-19 pandemic, and the costs of tropical storm Isaias, we are expecting closer to the lower-end of management's $3.60-$3.70 2020 guidance range," analysts at Siebert Williams Shank & Co. LLC said in an Aug. 21 investor note.

Siebert Williams Shank has a full-year 2020 estimate of $3.63 per share and a "buy" rating on the company. The S&P Capital IQ consensus estimate for the year is $3.64 per share.