Duke Misses Earnings, Tops Rev

Zacks

Duke Energy Corp. (DUK) reported adjusted first quarter 2013 earnings of $1.02 per share that came below the Zacks Consensus Estimate of $1.04. The quarterly earnings also fell below the year-ago figure of $1.13 by 9.7%.

The lower numbers mainly reflect the impact of share dilution from the Progress merger and less favorable results from the company's Commercial Power and International Energy units. The Commercial Power unit witnessed weak results from the Midwest generation fleet primarily owing to lower PJM capacity prices, while the International Energy division was adversely impacted by lower volumes and higher purchased power costs in Brazil due to a delay in the rainy season.

Operational Update

Duke Energy’s top line climbed a significant 62.5% year over year to $5,898.0 million in the reported quarter. The reported figure also beat the Zacks Consensus Estimate of $5,733.0 million.

On the cost front, total operating expenses were $4,685.0 million, up 49.3% from $3,138.0 million in the year-ago quarter.

The company registered a considerable improvement in its quarterly operating income to $1,215.0 million from $495.0 million in the same period last year.

Quarterly Segmental Highlights

U.S. Franchised Electric and Gas: Segment income was $656.0 million, up from $344.0 million a year ago. The results were driven by the addition of Progress Energy’s regulated utility operations in the Carolinas and Florida, increased pricing due to revised customer rates at Duke Energy Carolinas, favorable weather and improved wholesale revenues including new contracts.

International Energy: Segment income declined to $97.0 million from $142.0 million due to lower volume and higher purchased power costs in Brazil, unfavorable foreign exchange rates primarily in Brazil, and lower volumes and pricing at National Methanol Corporation.

Commercial Power: Segment income was $6.0 million, down 80% from the year-ago level of $30.0 million. The results reflect weak results from the Midwest coal and gas generation fleets.

Other: The segment includes corporate governance expenses, costs associated with the company's 2010 voluntary employee separation plan, costs-to-achieve the merger with Progress Energy and results from Duke Energy's captive insurance company.

Net expenses were $43.0 million, up from $10.0 million in the year-ago quarter. The significant increase reflects addition of interest expense on Progress Energy’s corporate debt.

Financial Update

At the end of Mar 31, 2013, the company held cash & cash equivalents worth $1,296.0 million versus $1,424.0 million at the end of 2012. Long-term debt decreased to $38,407.0 million (including current maturities) from $38,609.0 million at the end of 2012. In the first quarter 2013, the company generated $1,091.0 million from operating activities versus $872.0 generated in the year-ago quarter.

Guidance

Duke Energy maintained this year’s adjusted earnings guidance range of $4.20 to $4.45 per share.

Zacks Rank

Duke Energy presently retains a short-term Zacks Rank #3 (Hold). There are other stocks that are worth buying now. These include Brookfield Infrastructure Partners L.P. (BIP), Empresa Nacional de Electricidad S.A. (EOC) and The AES Corporation (AES). Brookfield Infrastructure and Empresa carry a Zacks Rank #1 (Strong Buy), while AES retains a Zacks Rank #2 (Buy).

Read the Full Research Report on BIP

Read the Full Research Report on DUK

Read the Full Research Report on AES

Read the Full Research Report on EOC

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