Market Wrap-up for May 5 - A Closer Look at Dominion Resources' Earnings

Yesterday, a dividend favorite announced its latest earnings results. Today, I’d like to take a closer look at Dominion Resources’ (D ) latest report.

Domion Resources’ Q1 Results

Dominion Resources reported earnings of $0.99 per share on revenue of $3.4 billion. D managed to beat EPS estimates by 3 cents, while revenue came in $200 million short of expectations. Year-over-year, earnings per share were 5 cents lower. Investors should remember, however, that in Q1 2014, D had a 6 cent per share gain from a one-time asset sale. EPS did come in toward the high-end range of D’s expectations of 85 cents to 1.

Dominion Resources’ profit came in at $536 million, or 91 cents per share. Year-over-year, this represents a $157 million increase in profits. Looking at D’s three main operating segments, profits break down as follows:

• Dominion Virginia Power increased profits from $131 million a year ago to $140 million.
• Dominion Generation saw profits decreasing 9% to $282 million.
• Dominion Energy saw profits slightly decrease from $208 million a year prior to $207 million.

Dominion Resources’ Guidance

Dominion Resources affirmed its FY2015 guidance of $3.50 to $3.85 in per-share operating profit, in line with analyst expectations. In Q2, D expects operating earnings to come in between 65 cents and 75 cents per share, below the most recent quarter’s figures and below analyst expectations. D expects a return to normal weather in its electric service territory and higher revenues from growth projects to be positive factors for Q2. Higher operating expenses, however, are expected to negatively impact bottom line returns.

Regarding current growth projects, CEO Thomas Farrell II noted, “Our infrastructure growth plan continues to move forward on time and on budget.”

Time to Make a Play?

Dominion Resources has shed roughly 7.5% year-to-date, while its P/E ratio sits at approximately 31.75. Over the trailing 1-year period, the stock is up only about 0.03%, while over the trailing 5-year period, D is up over 70%. D is currently trading well below its 52-week high of $80.89, seen on December 29, 2014.

Given Dominion’s lower guidance for the next quarter, the stock may see another dip, particularly if the company does not meet revenue estimates again. If the stock does dip and a good buying opportunity arises, investors should keep a close eye on Dominion’s ongoing growth projects as these will have significant impacts on future performance. Furthermore, it is important to keep in mind that the utilities industry has seen some relatively big changes in recent years (typically this sector does not experience many changes). We’re hoping that Dominion’s latest projects will position them to absorb and capitalize these latest industry trends.

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