Why Is PSEG (PEG) Down 16.8% Since Last Earnings Report?

A month has gone by since the last earnings report for PSEG (PEG). Shares have lost about 16.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PSEG due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Public Service Enterprise Q4 Earnings Beat Estimates

Public Service Enterprise Group (NYSE:PEG) Inc., or PSEG, reported fourth-quarter 2019 adjusted operating earnings of 64 cents per share, which surpassed the Zacks Consensus Estimate of 62 cents by 3.2%. The bottom line also improved 14.3% on a year-over-year basis.

Including one-time adjustments, the company reported quarterly earnings of 86 cents per share compared with 39 cents in fourth-quarter 2018.

For 2019, the company reported adjusted operating earnings of $3.28 per share, which surpassed the Zacks Consensus Estimate of $3.26 by 0.6%. The full-year bottom line also improved 5.1% from a year ago and exceeded the mid-point of the company’s projected range of $3.20-$3.30 per share.

The upside can be attributed to Public Service Enterprise’s continued focus on operating excellence and cost discipline.

Total Revenues

Revenues of $2,478 million in the quarter missed the Zacks Consensus Estimate of $2,854 million by 13.2%. However, the figure inched up 0.4% from the year-ago quarter’s $2,468 million.

Highlights of the Release

During the fourth quarter of 2019, the company reported operating income of $507 million, up from $501 million in the year-ago quarter. Total operating expenses were $1,971 million, up 0.2% from the year- ago quarter.

Interest expenses in the reported quarter were $152 million.

Segment Performance

PSE&G: Segment earnings were $276 million, up from $239 million in the prior-year quarter. PSE&G’s results in the quarter were driven by enhanced investments in transmission..

PSEG Power: Segment adjusted earnings were $52 million compared with $57 million in the prior-year quarter. The downside was due to scheduled decline in capacity prices in PJM and ISO-New England in the second half of 2019.

PSEG Enterprise/Other: Segment adjusted earnings were $2 million against loss of $12 million in the prior-year quarter. The year-over-year upside can be attributed to lower taxes.

2020 Guidance

The company issued its 2020 guidance. Adjusted earnings are projected to be $3.30-$3.50 per share. The Zacks Consensus Estimate for earnings is currently pegged at $3.36, lower than the mid-point of the company’s guided range.

PSE&G’s operating earnings are anticipated to be $1,310-$1,370 million. The company expects PSEG Power operating earnings to be $345-$435 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, PSEG has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, PSEG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.