RBC Capital Markets upgraded its ratings for Duke Energy, saying Tuesday that the utility company should benefit from changing regulations and rate settlements.
THE OPINION: Analyst Shelby Tucker believes that Duke will benefit from pending regulatory developments in North Carolina and Indiana, where she expects two separate matters will be settled in Duke's favor and allow it to raise rates.
Tucker expects a bill sent to the governor last week, a constructive rate-making mechanism, will be signed into law, which would be a plus for Duke. And the company, RBC believes, is close to settling a rate dispute with North Carolina, clearing a big hurdle.
"We believe that Duke will be able to stay out of rate cases over the next few years," Tucker wrote. She raised her rating on the stock to "Outperform" from "Sector Perform" Tuesday, saying that Duke is a core holding for utility investors and deserves a premium valuation due to its above-average earnings growth, high yield and a stable regulatory environment.
Duke, based in Charlotte, N.C., serves 7 million electric customers in six states after the 2012 acquisition of Progress Energy.
The analyst said in a research note The company earned $1.77 billion last year as it benefited from higher rates and severe weather that increased demand for power. It issued a moderate forecast for the year in February, which met market forecasts but did not exceed it, to accommodate for various possible outcomes of pending rate cases.
Tucker also increased her price target to $78 from $74.
THE STOCK: Duke Energy Corp. rose $1.60 to $73.45 in midday trading. The company's stock price has climbed more than 20 percent since November and hit a 12-year high Monday, clocking in at $73.59.