Allegheny Energy (AYE) has beaten the Zacks Consensus EPS estimate of 55 cents by four cents to clock earnings per share of 59 cents in the third quarter of fiscal 2009.

Allegheny Energy also crossed the year-ago EPS by five cents due to improved result from its Delivery & Services business. Earnings rose to $31.5 million from $4.3 million in the year-ago quarter. The improvement was due to increased cost recovery in Virginia , the elimination of an inter-company transfer payment and higher revenues from transmission expansion. These benefits were partially offset by lower retail electricity sales and higher income taxes, primarily due to an increase in pre-tax income.

However this was partially offset by lower earnings at the Generation and Marketing business. Here, earnings fell to $45.5 million from $84.7 million in the year-ago quarter due to a tepid economy and low power prices. Earnings were affected by lower generation volume and power prices, as well as the scrubber tie-in work at Hatfield’s Ferry and the elimination of an inter-company transfer payment, partially offset by higher generation rates in Pennsylvania , the benefit of hedging activity, lower fuel costs and lower income taxes.

Revenues waned 6.6% year-over-year to $793.7 million in the quarter due to dismal showing at its unregulated business covering the Generation & Marketing segment. However, this was partially offset by the regulated business comprising the Delivery and Services segment. Delivery and Services segment topline rose 13.1%. On the other hand, Generation & Marketing segment topline shrunk 23.6%. Allegheny Energy’s industrial volume sales fell 8.6% year-over-year. This was due to lower usage per customer, which dipped 9.6%.

Allegheny Energy reported cash and cash equivalents at the end of the reported quarter of $278.3 million, while long-term debt stood at $4.3 billion. We maintain our Neutral recommendation on the shares.
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