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Duke Energy’s International Operations and 4Q15 Earnings

Vincent Kruger

Duke Energy: Can It Ride Gains in 2016 through 4Q15 Results?

Duke Energy 2016 guidance

Duke Energy Corporation (DUK) is expected to report its fourth quarter earnings on February 18, 2016. Analysts expect Duke to earn $0.90 per share in 4Q15 compared to $0.86 per share in 4Q14, and management has narrowed its 2015 earnings guidance range to $4.55–$4.65 per share from the $4.55–$4.75 guidance it gave previously.

Duke lowered its fiscal year earnings expectations due to unfavorable foreign currency trends and bonus depreciation, and Duke Energy management expects the milder weather the US saw in 4Q15 to affect earnings negatively.

Duke’s performance drivers

Duke Energy is facing revenue headwinds due to lower usage of electricity per customer. Over the past two quarters, Duke saw negligible increases in load growth, although it consistently added new customers to its service portfolio in 2015. Duke’s international segment is still under pressure, which may end up dragging down the company’s 4Q15 earnings further.

Meanwhile, Brazil’s flailing economy and three-year long drought contributed to the dismal performance of Duke International Energy, and Duke’s international fiscal 2015 earnings are expected to fall by more than 50% over 2014. Duke also sold its unregulated Midwest generation business in 2015, and now it’s looking to sell its weak Latin American division.

Tapping growth opportunities in natural gas

Facing meager growth opportunities in its electric segment, Duke Energy acquired Piedmont Natural Gas (PNY) in an effort to expand in the faster-growing gas utility (JXI) business. Similarly, Dominion Resources (D) recently bought Questar Corporation (STR) to secure better access to natural gas.

Notably, however, Duke Energy was fined $6.6 million on February 9, 2016, by North Carolina regulators for a liquefied coal ash spill at its Dan River power plant.

Now let’s look at Duke Energy’s customer growth in 4Q15.

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