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Mild Weather Factor in Duke Energy’s 4Q15 Earnings Estimate Miss

Vincent Kruger

Duke Energy Posted Sturdy Growth in 2015, Released 2016 Guidance

DUK’s 4Q15 earnings

The largest utility in the US by market capitalization, Duke Energy (DUK) reported its 4Q15 results on February 18, 2016. Duke Energy missed analysts’ estimates and reported earnings per share (or EPS) of $0.87 in 4Q15. For the same quarter last year, Duke earned $0.86 per share.

Duke Energy’s earnings in the fourth quarter were mainly impacted by unfavorable weather. Duke’s principal operational zones, the Carolinas and the Midwest, recorded warmer December in the fourth quarter of 2015.

Performance drivers

Duke Energy’s (DUK) 4Q15 performance was primarily uplifted by its key performers—its Regulated Utilities segment. Increased pricing in the retail segment and improved wholesale margins partially compensated the impact of adverse weather conditions. Net income from the Regulated Utilities (JXI) segment increased by 9% in 4Q15 from $551 million to $601 million.

Duke’s earnings from its International Energy operations stayed flat for 4Q15 compared to 4Q14. Stronger results from lower purchased power costs were partially offset by a stronger dollar. Duke is looking to sell its Latin American arm due to its consistently poor performance.

A stronger dollar is making a negative impact on the companies that have heavy international exposure. Similar to Duke, PPL Corporation (PPL) and AES Corporation (AES) have a significant exposure to offshore assets. Sempra Energy (SRE) also has an international presence.

Earnings from Duke Energy’s commercial portfolio slightly improved during the quarter due to its additional in-service renewable assets.

Duke Energy’s full-year earnings

Duke Energy (DUK) reported adjusted EPS of $4.05 per share for fiscal 2015 compared with its 2014 EPS of $2.66 per share. For fiscal 2016, Duke Energy’s management has provided an earnings guidance range of $4.50–$4.70 per share.

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