Constellation posts 4Q profit of $65 million, or 39 cents a share

Company is predicting strong 2003 and 2004 as rebound continues

February 01, 2003|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Continuing to rebound from a year earlier, Constellation Energy Group Inc. said yesterday that it earned $65 million in the fourth quarter of 2002, exceeding analysts' expectations.

Chief executive Mayo A. Shattuck III said during a conference for analysts in New York City that the success of the parent of Baltimore Gas and Electric Co. can be attributed to an aggressive strategy based on maintaining a strong balance sheet, refocusing its business on customer needs and selling assets not related to the energy business.

Including a charge taken for work force reductions and a gain from selling investments, earnings were 39 cents per share in the three months that ended Dec. 31, up from analysts' predictions of about 35 cents. Excluding the special items, the company earned $67.5 million, or 41 cents a share.

In the corresponding period a year earlier, Constellation lost $260.1 million, or $1.59 a share.

Revenue jumped 56 percent to $1.4 billion, from $878 million in the year-earlier quarter.

"We're very proud of this accomplishment," Shattuck said. "We believe we are one of the few companies we monitor that managed to exceed guidance we established in January 2002.

"When I first took this job with all the turbulence in the industry and skepticism about growth, everyone asked us why in the world we would promise 10 percent growth," Shattuck added.

"What we've tried to demonstrate is that we have executed on that promise and will continue executing on that promise."

The strong results mark the fifth consecutive quarter in which Constellation has met or exceeded earnings forecasts. Only a year ago, Constellation was struggling to restore Wall Street confidence after it canceled an ambitious plan to split into two businesses and saw its stock price plunge.

Over the past five months, Constellation has acquired four energy businesses that added thousands of large industrial and commercial customers to its client list.

Constellation said future company growth will be based on those businesses adding more clients who are seeking energy services that are tailored to their specific needs.

The strength of BGE, Constellation's regulated utility, also was a major factor in raising fourth-quarter results, Shattuck said.

For the full year, excluding special items, Constellation earned $525.6 million, or $2.52 per share. Including a net gain on sales of real estate investments and sales of assets such as its senior living facilities, it earned $3.20 per share.

In the previous year, Constellation earned $90.9 million, or 57 cents a share. Several items dragged down earnings that year, including charges it took for terminating its contract with Goldman Sachs Group Inc., work force reduction costs and a loss on the sale of Guatemalan operations.

`Give him credit'

"A year ago, Mr. Shattuck was just there 100 days," said Michael S. Worms, an energy analyst with Gerard Klauer Mattison.

"Constellation was under some pressure with regard to its earnings and strategy. Give him credit for turning this ship around quickly.

"They have a strong balance sheet and leverage that's particularly helpful in an environment in 2002 in which the industry itself has been under a lot of pressure," Worms said.

Yesterday, Chief Financial Officer E. Follin Smith said the company predicts that 2003 and 2004 also will produce strong results.

The company expects to earn $2.65 to $2.85 per share this year, a 5 percent to 13 percent improvement over 2002. Earnings will improve with further cost-savings measures, the growth of its new customer-oriented energy businesses, the addition of new plants coming online and continued, reliable performance at BGE.

"We have a terrific number of positive factors with very few negatives," Smith said. "We see continued strong growth opportunities. We expect 2004 to be well above 10 percent."

Shares of Constellation climbed 65 cents to $27.65 on the New York Stock Exchange yesterday.

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