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Earnings Preview: Duke Energy - Analyst Blog

Wednesday, November 07, 2012

Duke Energy Corporation (DUK) is expected to release its third quarter 2012 results before the opening bell on November 8, 2012. The Zacks Consensus Estimate for the third quarter of 2012 is $1.45 per share (year-over-year decrease of 3.41%) on revenues of $6,223 million (significant year-over-year increase of 57%).

Second-quarter 2012, a Synopsis

Duke Energy announced second-quarter 2012 adjusted earnings of $1.02 per share, beating both the Zacks Consensus Estimate of 95 cents and the year-ago figure of 99 cents. The upsurge came from revised customer rates in the Carolinas and lower storm restoration costs year over year. These were partially offset by less favorable weather, higher financing costs, and increased depreciation expense.

Duke Energy generated total revenue of $3,577 million in the reported quarter, falling short of the Zacks Consensus Estimate of $4,355 million. However, it was above the year-ago figure of $3,534 million.

Guidance

Duke Energy remains on track to achieve its 2012 adjusted earnings guidance range of $4.20 to $4.35 per share.

Read our full coverage on this earnings report: Duke Ups Profit, Misses Revenue

Zacks Consensus             

The analysts covered by Zacks expects Duke Energy to post third-quarter 2012 earnings of $1.45 per share, lower than 1.50 delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of $1.40 and $1.54 a share.

For 2012, the Zacks Consensus Estimate stood at $4.27 per share, lower than its prior-year earnings of $4.38 per share. The current Zacks Estimate ranges between $4.16 and $4.36 per share.

Estimate Revisions Trend

Agreement

We see a slight upward trend for estimates for the third quarter of 2012. Among the 10 estimates, none of the estimates moved upwards over the last 7 days while two moved in the upward direction over the last 30 days. In the last 7 days, though none of the estimates moved in the opposite direction, one moved in the opposite direction over the last 30 days.

For full-year 2012, among the 17 estimates, none of the estimates moved upwards over the last 7 days while two moved up over the last 30 days. In the last 7 days, none of the estimates moved in the opposite direction but one moved in the opposite direction over the last 30 days.

The analysts seem to be slightly positive for third quarter as well as full-year 2012.

Magnitude

The Zacks Consensus Estimate for the third quarter of 2012 remained static over the last 7 days, whereas it inched up by 4 cents to $1.45 over the last 30 days. For full-year 2012, the Zacks Consensus Estimate remained static at $4.27 for the last 7 days and inched by a penny over the last 30 days.

Surprise History

With respect to earnings surprises, Duke Energy has topped the Zacks Consensus Estimate over the last four quarters in the range of 5.56% to 14.29%. The average surprise over the last four quarters remained at positive 8.40%. The earnings beat in December 2011 was the highest at 14.29%.

Our Recommendation

Charlotte, North Carolina-based Duke Energy Corporation is a diversified energy company with a portfolio of domestic and international, natural gas and electric, regulated and unregulated businesses, which supply, deliver, and process energy for customers in North America and selected international markets.

Duke Energy Corporation’s U.S. electricity and gas operations are spread over Carolinas, Florida, Indiana, Kentucky and Ohio that generate a relatively stable and growing earnings stream. Also, the company’s merger with Progress Energy Inc. and ongoing capital expansion projects add visibility to the story.

However, we remain concerned due to the present unfavorable macro backdrop, predominantly fossil-fuel based generation assets, tepid demand for electricity, pending regulatory cases and after affects of Sandy Hurricane.

New Jersey was the hardest hit by Sandy with about 65% of customers. Other hard-hit states include Connecticut, West Virginia, New York and Rhode Island. The biggest utilities in the path of the storm included units of Exelon Corporation (EXC), FirstEnergy Corporation (FE), Consolidated Edison Inc. (ED), Northeast Utilities (NU), Dominion Resources, Inc. (D), and Public Service Enterprise Group Inc. (PEG).

The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.


 
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