U.S. Markets closed

Will Duke Energy (DUK) Disappoint Investors in Q1 Earnings?

Zacks Equity Research

Duke Energy Corp. DUK, an electric and natural gas utility based in Charlotte, NC, is set to report first-quarter 2017 results before the opening bell on May 9.

Last quarter, the company posted in-line earnings. However, it surpassed the Zacks Consensus Estimate in three of the past four quarters, with an average positive earnings surprise of 3.41%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

Being a premier utility service provider, Duke Energy continues to invest in electric and gas infrastructure along with retail and wholesale customer growth. Management believes that in 2017, the company will perform favorably in the electric business driven by base rate increases in Duke Energy Progress South Carolina and the generation base rate adjustment mechanism in Florida. However, higher depreciation, interest expense and other taxes might partially mar the aforementioned positive outcomes.

On the other hand, the company maintains its commitment to reduce its operations and maintenance (O&M) costs. We expect the company’s first-quarter results to reflect these scores.

Meanwhile, at the onset of the first quarter, the company acquired three solar power projects totaling 55 megawatts (MW) from SunPower Corporation SPWR. These projects will increase Duke Energy’s solar presence in California by 50%, which, in turn, is expected to boost the company’s first-quarter sales growth.

On the flip side, the company's service territories witnessed warmer-than-normal temperatures during the first quarter. This will result in lower household expenditure on heating and might adversely impact revenues for the energy provider. Also, potential volatility in market prices of fuel, electricity and other renewable energy commodities could create operational risks for Duke Energy.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at $1.07 a share, reflecting a decrease of 5.01% year over year, while the consensus for revenues is $5.80 billion, implying 3.22% year-over-year growth.

Duke Energy Corporation Price and EPS Surprise


Duke Energy Corporation Price and EPS Surprise | Duke Energy Corporation Quote

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Duke Energy this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Zacks ESP: Duke Energy has an Earnings ESP of -2.80%. This is because the Most Accurate estimate stands at $1.04, lower than the Zacks Consensus Estimate of $1.07. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Duke Energy carries a Zacks Rank #4 (Sell).

Note that, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are a few stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

Pattern Energy Group, Inc. PEGI has an Earnings ESP of +250.00% and a Zacks Rank #3. The company is expected to report first-quarter results on May 9. You can see the complete list of today’s Zacks #1 Rank stocks here.

The AES Corporation AES has an Earnings ESP of +10.00% and a Zacks Rank #3. The company is slated to release first-quarter results on May 8.

More Stock News: 8 Companies Verge on Apple-Like Run             

Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. 

A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.Click to see them right now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Duke Energy Corporation (DUK): Free Stock Analysis Report
The AES Corporation (AES): Free Stock Analysis Report
Pattern Energy Group Inc. (PEGI): Free Stock Analysis Report
SunPower Corporation (SPWR): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research