On Apr 8, 2013, shares of Duke Energy Corporation (DUK) hit a new 52-week high of $73.08. Previously, the company had reported solid fourth-quarter results with a positive earnings surprise of 7.69%. Duke Energy witnessed positive earnings surprises in all the 4 quarters of 2012, with an average beat of 5.50%.
Completion of a few pending regulatory cases at Ohio and Carolina, a number of solar and wind power projects in Texas, Arizona and Carolina, successful merger with Progress Energy Inc. and the company’s strategy of returning wealth to shareholders have helped the company in achieving this new high.
In addition, Duke Energy’s industry-high Return on Investment (“ROI”) of 4.2% represents a strong sign of operational efficiency. Moreover, the current ratio of 1.01 compared to the industry average of 0.88 demonstrates the company’s operational effectiveness.
Duke Energy has a strong balance sheet when compared to its peers with a low long-term debt-to-capitalization of 46.3% at the end of 2012 versus the Zacks industry average of 49.2%. Duke Energy continues to be a strong cash generator with its operating cash flow reaching approximately $5.24 billion during 2012 compared with $3.67 billion in 2011. Cash and cash equivalents at the end of 2012 were $1.42 billion.
Also, Duke Energy follows an effective cash deployment strategy via dividend payments. In Jun 2012, the company increased its annual dividend for the 86th consecutive year. With the current price of $73.08, the company generates a dividend yield of 4.19%.
Duke Energy’s acquisition of fellow North Carolina based utility, Progress Energy, has spread the new entity’s stable U.S. electricity and gas operations over 7.1 million electric customers in the Carolinas, Florida, Indiana, Kentucky and Ohio. Also, the company’s investment plans help in mitigating long-term environmental-related risks.
Going forward, key growth drivers of the company include its strong balance sheet and ongoing capital expansion projects like Edwardsport Integrated Gasification Combined Cycle Plant and L.V. Sutton Combined Cycle plant. These factors would help the company in achieving its earnings growth target range of 4% to 6% by 2015.
Duke Energy presently retains a short-term Zacks Rank #3 (Hold). Other stocks worth considering are Empresa Nacional de Electricidad S.A. (EOC), Huaneng Power International, Inc. (HNP) and Pike Electric Corporation (PIKE), all with a Zacks Rank #1 (Strong Buy).
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