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Duke Energy (DUK) Up 5.8% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Duke Energy (DUK). Shares have added about 5.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Duke Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Duke Energy Q2 Earnings Top Estimates, Revenues Up Y/Y

Duke Energy Corporation reported second-quarter 2019 earnings of $1.12 per share, which surpassed the Zacks Consensus Estimate of 98 cents by 14.3%. The bottom line also improved 57.7% year over year, driven by revenues as well as operating income growth.

Total Revenues

Total operating revenues came in at $5,879 million, up 4.1% from $5,643 million a year ago. The reported figure also exceeded the Zacks Consensus Estimate of $5,689 million by 3.3%.

The regulated electric unit’s revenues were $5,423 million (up 4.7% year over year), representing 92.2% of total revenues in the first quarter.

Revenues from the regulated natural gas business totaled $280 million, down 3.8% year over year.

The Non-regulated and Other segment generated revenues of $170 million, which dropped 2.3% year over year.

Operational Update

Duke Energy’s total operating expenses amounted to $4,578 million in the reported quarter, down from $4,667 million in 2018’s second quarter. The decline was on account of lower natural gas cost, reduced operation, maintenance and other expenses as well as decreased impairment charges.

Operating income increased 32.6% to $1,298 million from $979 million a year ago.

Interest expenses rose to $542 million from $518 million in 2018’s second quarter.

Quarterly Segmental Highlights

Electric Utilities & Infrastructure: Net income in the second quarter totaled $809 million, which came in higher than the year-ago quarter’s figure of $575 million.  

Gas Utilities & Infrastructure: Net income at this segment summed $40 million, up from $28 million recorded a year ago.

Commercial Renewables: This segment reported net income of $86 million in the quarter under review compared with $38 million a year ago.

Other: The segment includes corporate interest expenses not allocated to other business units, results from Duke Energy’s captive insurance company and other investments.

This segment incurred a net loss of $115 million compared with loss of $136 million in the year-ago quarter.

Financial Condition

As of Jun 30, 2019, Duke Energy had cash & cash equivalents of $336 million, down from $442 million as on Dec 31, 2018. Long-term debt was $54.3 billion at the end of the second quarter compared with $51.1 billion at 2018 end.

In the first six months of 2019, the company generated net cash from operating activities of $3,056 million compared with $3,302 million in the prior year.

Guidance

Duke Energy reaffirmed its earnings guidance for 2019. It still expects adjusted earnings per share of $4.80-$5.20. The Zacks Consensus Estimate for 2019 earnings is pegged at $4.92, below the mid-point of the company’s projected range.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Duke Energy has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Duke Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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