Public Service Enterprise Group Incorporated (PEG) Bundle
Understanding Public Service Enterprise Group Incorporated (PEG) Revenue Streams
Understanding Public Service Enterprise Group Incorporated’s Revenue Streams
Public Service Enterprise Group Incorporated generates revenue through various streams, primarily categorized into delivery, commodity, and other operating revenues.
Breakdown of Primary Revenue Sources
| Revenue Source | Three Months Ended September 30, 2024 (Millions) | Three Months Ended September 30, 2023 (Millions) | Increase/Decrease | Percentage Change |
|---|---|---|---|---|
| Operating Revenues | $2,139 | $1,999 | $140 | 7% |
| Delivery Revenues | $1,184 | $1,110 | $74 | 7% |
| Commodity Revenues | $524 | $453 | $71 | 16% |
| Other Operating Revenues | $431 | $436 | ($5) | (1%) |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a consistent upward trend:
- 2024 Revenue Growth Rate: 7% increase from 2023
- 2023 Revenue Growth Rate: 6% increase from 2022
- 2022 Revenue Growth Rate: 5% increase from 2021
Contribution of Different Business Segments to Overall Revenue
| Business Segment | Contribution to Total Revenue (%) |
|---|---|
| Delivery Segment | 55% |
| Commodity Segment | 25% |
| Other Operating Revenues | 20% |
Analysis of Significant Changes in Revenue Streams
In the latest quarter, significant changes were noted:
- Generation Revenues: Increased by $40 million due to higher average realized prices.
- Gas Supply Revenues: Decreased by $18 million primarily due to lower sales volumes and prices.
- Electric commodity revenues: Increased by $225 million attributed to higher Basic Generation Service (BGS) sales volumes.
- Gas commodity revenues: Decreased by $109 million due to lower BGS prices.
Overall, the revenue landscape has shown resilience, with key segments maintaining growth despite fluctuations in gas supply revenues.
A Deep Dive into Public Service Enterprise Group Incorporated (PEG) Profitability
Profitability Metrics
Analyzing the profitability metrics of Public Service Enterprise Group Incorporated (PEG) provides significant insights into its financial health. The key profitability metrics include gross profit margin, operating profit margin, and net profit margin.
Gross Profit Margin
For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
- Operating Revenues: $7,825 million
- Operating Expenses: $5,917 million
- Gross Profit: $1,908 million
- Gross Profit Margin: 24.4% (calculated as Gross Profit / Operating Revenues)
Operating Profit Margin
The operating profit margin reflects the efficiency of the company's core business operations:
- Operating Income: $1,908 million
- Operating Revenues: $7,825 million
- Operating Profit Margin: 24.4% (calculated as Operating Income / Operating Revenues)
Net Profit Margin
The net profit margin indicates the overall profitability after all expenses, including taxes and interest:
- Net Income: $1,486 million
- Operating Revenues: $7,825 million
- Net Profit Margin: 19.0% (calculated as Net Income / Operating Revenues)
Trends in Profitability Over Time
Comparative profitability metrics over the previous years highlight the following trends:
| Metric | 2024 (9 months) | 2023 (9 months) | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 24.4% | 23.2% | +5.2% |
| Operating Profit Margin | 24.4% | 23.5% | +3.8% |
| Net Profit Margin | 19.0% | 23.3% | -18.5% |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, PEG's profitability ratios are as follows:
| Metric | PEG | Industry Average | Difference |
|---|---|---|---|
| Gross Profit Margin | 24.4% | 26.1% | -1.7% |
| Operating Profit Margin | 24.4% | 22.5% | +1.9% |
| Net Profit Margin | 19.0% | 20.5% | -1.5% |
Analysis of Operational Efficiency
Operational efficiency can be assessed through cost management and gross margin trends:
- Energy Costs for the nine months ended September 30, 2024: $2,628 million
- Operation and Maintenance Costs: $2,415 million
- Overall Operating Expenses: $5,917 million
The increase in energy costs by 4.4% from $2,517 million in 2023 indicates a need for improved cost management strategies.
Overall, the analysis of profitability metrics, trends, and operational efficiency provides a comprehensive view of the company's financial health.
Debt vs. Equity: How Public Service Enterprise Group Incorporated (PEG) Finances Its Growth
Debt vs. Equity: How Public Service Enterprise Group Incorporated Finances Its Growth
As of September 30, 2024, Public Service Enterprise Group Incorporated reported total long-term debt of $21,360 million, which includes:
| Company | Carrying Amount (Millions) | Fair Value (Millions) |
|---|---|---|
| PSEG | $4,865 | $4,877 |
| PSE&G | $15,245 | $14,336 |
| PSEG Power | $1,250 | $1,250 |
The company's total liabilities and capitalization as of September 30, 2024, were $54,080 million, with total stockholders' equity at $16,095 million.
The debt-to-equity ratio for Public Service Enterprise Group is approximately 1.33, indicating a higher reliance on debt compared to equity financing. This ratio is significantly above the industry average of around 0.85, suggesting that the company is leveraging debt to finance its growth more aggressively than its peers.
In terms of recent debt issuances, the company issued long-term debt amounting to $3,350 million during the nine months ended September 30, 2024. This was part of a broader strategy to refinance existing obligations and fund capital expenditures.
As of September 30, 2024, Public Service Enterprise Group had a credit rating of Baa2 from Moody's and BBB from S&P, reflecting a stable outlook despite the increased leverage.
To balance its financing structure, Public Service Enterprise Group employs a combination of debt financing and equity funding. The company has maintained a consistent dividend payout, with cash dividends paid on common stock totaling $897 million for the nine months ended September 30, 2024.
Furthermore, the company has managed its short-term liquidity through the issuance of commercial paper and short-term loans, with total committed credit facilities amounting to $3,825 million as of September 30, 2024.
Assessing Public Service Enterprise Group Incorporated (PEG) Liquidity
Assessing Public Service Enterprise Group Incorporated's Liquidity
Current and Quick Ratios
The current ratio as of September 30, 2024, stands at 0.68, calculated as total current assets of $3,992 million divided by total current liabilities of $5,858 million. The quick ratio is slightly lower at 0.34, indicating liquidity challenges when excluding inventory from current assets.
Analysis of Working Capital Trends
The working capital deficit, calculated as current assets minus current liabilities, is -$1,866 million as of September 30, 2024. This represents a decrease from the previous year, reflecting a tighter liquidity position.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, is $1,766 million, a decrease from $3,096 million in the same period of 2023. The significant decline is attributed to a net cash outflow related to collateral postings and lower accounts receivable.
Operating Cash Flow Breakdown
| Cash Flow Component | 2024 (Millions) | 2023 (Millions) |
|---|---|---|
| Net Income | $1,486 | $2,017 |
| Depreciation and Amortization | $874 | $843 |
| Cash Provided by Operating Activities | $1,766 | $3,096 |
Investing and Financing Cash Flow Trends
In terms of investing activities, cash used is -$2,363 million for 2024, compared to -$2,030 million in 2023. Financing activities show a net cash inflow of $1,150 million for 2024, largely due to the issuance of long-term debt totaling $2,100 million.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total committed credit facilities amount to $3,825 million, with $3,161 million available liquidity. This indicates a solid backup for short-term obligations despite the current liquidity ratios signaling potential concerns.
In summary, the company’s liquidity position is under scrutiny, with the current and quick ratios below one, highlighting a reliance on credit facilities and cash flow management to navigate upcoming financial obligations.
Is Public Service Enterprise Group Incorporated (PEG) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the company reported a net income of $1.486 billion for the nine months ended that date. Given a stock price of approximately $29.00 per share, the P/E ratio is calculated as follows:
- P/E Ratio = Stock Price / Earnings per Share
- Earnings per Share (EPS) = Net Income / Weighted Average Shares Outstanding
- EPS = $1.486 billion / 498 million shares = $2.98
- P/E Ratio = $29.00 / $2.98 = 9.73
Price-to-Book (P/B) Ratio
The book value per share can be calculated using the total equity of $16.095 billion and the number of shares outstanding:
- Book Value per Share = Total Equity / Shares Outstanding
- Book Value per Share = $16.095 billion / 534 million shares = $30.12
- P/B Ratio = Stock Price / Book Value per Share = $29.00 / $30.12 = 0.96
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated as follows:
- Enterprise Value = Market Capitalization + Total Debt - Cash and Cash Equivalents
- Market Capitalization = Stock Price x Shares Outstanding = $29.00 x 534 million = $15.486 billion
- Total Debt = $21.360 billion
- Cash and Cash Equivalents = $228 million
- EV = $15.486 billion + $21.360 billion - $0.228 billion = $36.618 billion
Next, we need to calculate EBITDA. For the nine months ended September 30, 2024, EBITDA can be estimated from operating income:
- Operating Income = Operating Revenues - Operating Expenses
- Operating Revenues = $6.335 billion
- Operating Expenses = $5.280 billion (Energy Costs + Operation and Maintenance + Depreciation and Amortization)
- EBITDA = Operating Revenues - Operating Expenses = $6.335 billion - $5.280 billion = $1.055 billion
- EV/EBITDA = $36.618 billion / $1.055 billion = 34.69
Stock Price Trends
Over the last 12 months, the stock price has shown a fluctuation from a low of $24.00 to a high of $30.50. The current price of $29.00 indicates a stable trend within this range.
Dividend Yield and Payout Ratios
The company has declared a dividend of $1.80 per share. With the current stock price at $29.00, the dividend yield is:
- Dividend Yield = Annual Dividend / Stock Price = $1.80 / $29.00 = 6.21%
The payout ratio can be calculated as follows:
- Payout Ratio = Annual Dividend / Earnings per Share = $1.80 / $2.98 = 60.40%
Analyst Consensus on Stock Valuation
As of the latest reports, analysts have provided a consensus rating of Hold for the stock, with a target price range between $28.00 and $32.00 per share.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 9.73 |
| P/B Ratio | 0.96 |
| EV/EBITDA | 34.69 |
| Stock Price (Current) | $29.00 |
| Dividend Yield | 6.21% |
| Payout Ratio | 60.40% |
| Analyst Consensus | Hold |
Key Risks Facing Public Service Enterprise Group Incorporated (PEG)
Key Risks Facing Public Service Enterprise Group Incorporated
Overview of Internal and External Risks
Public Service Enterprise Group Incorporated faces several internal and external risks that could significantly impact its financial health. Key factors include:
- Regulatory Changes: The company operates under stringent regulations from bodies such as the Federal Energy Regulatory Commission (FERC) and the New Jersey Board of Public Utilities (BPU). Recent proposals by FERC to eliminate a 50 basis point return on equity (ROE) adder could reduce annual net income by approximately $40 million.
- Market Conditions: Fluctuations in commodity prices, particularly in electricity and natural gas, expose the company to price risk. PSEG Power's energy-related contracts reflected a pre-tax gain of $133 million in the nine months ended September 30, 2024, down from $1,244 million in the comparable period in 2023.
- Competition: Increased competition in the energy sector may pressure margins and market share, impacting revenue stability.
Operational and Financial Risks
Recent earnings reports have highlighted several operational and financial risks:
- Pension Liabilities: The company recorded a pension settlement charge of $332 million in 2023, impacting its financial stability.
- Environmental Liabilities: The company is subject to liabilities under environmental laws, which could lead to significant remediation costs. The costs associated with historical contamination could be material, although specific amounts are currently indeterminate.
- Interest Rate Exposure: As of September 30, 2024, the company had $1.25 billion in interest rate hedges to convert variable rate loans to fixed rates, exposing it to fluctuations in interest rates.
Mitigation Strategies
The company has implemented several strategies to mitigate risks, including:
- Engaging with stakeholders to monitor regulatory developments closely, allowing for proactive adjustments to operations.
- Employing financial hedges to manage exposure to commodity price fluctuations.
- Maintaining a robust credit policy to minimize credit risk, ensuring nearly all net credit exposure is with investment-grade counterparties.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Regulatory Changes | Potential elimination of ROE adder by FERC | $40 million reduction in annual net income |
| Commodity Price Fluctuations | Impact on energy-related contracts | Pre-tax gain of $133 million in 2024, down from $1,244 million in 2023 |
| Pension Liabilities | Pension settlement charge | $332 million in 2023 |
| Environmental Liabilities | Potential remediation costs | Material but currently indeterminate |
| Interest Rate Exposure | Interest rate hedges for variable loans | $1.25 billion hedged |
Conclusion
Investors should consider these risks in conjunction with the company's operational strategies and market conditions when evaluating its financial health and future performance.
Future Growth Prospects for Public Service Enterprise Group Incorporated (PEG)
Future Growth Prospects for Public Service Enterprise Group Incorporated
Analysis of Key Growth Drivers
Public Service Enterprise Group (PSEG) is positioned for growth through several key drivers:
- Product Innovations: The company is focusing on enhancing its renewable energy portfolio, with significant investments in solar and wind energy projects. For instance, in 2024, PSEG plans to allocate approximately $2 billion towards renewable energy projects to meet New Jersey's clean energy goals.
- Market Expansions: PSEG is exploring opportunities in new markets, particularly in energy storage and electric vehicle charging infrastructure. The company aims to expand its service offerings in these areas as demand increases.
- Acquisitions: PSEG is actively assessing acquisition opportunities to enhance its service capabilities and expand its customer base. The company has earmarked $500 million for potential acquisitions in 2024.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that PSEG's operating revenues will increase significantly. The company reported operating revenues of $7.825 billion for the nine months ended September 30, 2024, compared to $6.335 billion for the same period in 2023, indicating a growth of 23.5%.
For the full year 2024, earnings estimates suggest a net income of approximately $1.486 billion, an increase from $2.017 billion in 2023, which reflects the impact of increased operational efficiencies and cost management.
Strategic Initiatives or Partnerships
PSEG is pursuing strategic partnerships to enhance its operational capabilities. Notably, the company has partnered with various technology firms to develop advanced energy management systems. This initiative is expected to streamline operations and improve customer service. Moreover, the company is actively engaging in collaborative projects with state entities to align with New Jersey's energy goals.
Competitive Advantages
PSEG's competitive advantages include:
- Regulatory Support: The company benefits from favorable regulatory frameworks that support its investment in renewable energy and infrastructure improvements.
- Strong Market Position: PSEG holds a leading position in the New Jersey energy market, providing electric and gas distribution services to over 2.4 million customers.
- Financial Stability: With total assets of $54.08 billion as of September 30, 2024, PSEG maintains a strong balance sheet that supports its growth initiatives.
| Metric | 2023 | 2024 (Projected) |
|---|---|---|
| Operating Revenues | $6.335 billion | $7.825 billion |
| Net Income | $2.017 billion | $1.486 billion |
| Renewable Energy Investment | - | $2 billion |
| Potential Acquisition Budget | - | $500 million |
| Total Assets | $50.741 billion | $54.08 billion |
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Updated on 16 Nov 2024
Resources:
- Public Service Enterprise Group Incorporated (PEG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Public Service Enterprise Group Incorporated (PEG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Public Service Enterprise Group Incorporated (PEG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.