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Why Is Duke Energy (DUK) Up 3.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Duke Energy (DUK - Free Report) . Shares have added about 3.2% 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 the most recent earnings report in order to get a better handle on the important drivers.

Duke Energy Q4 Earnings Miss Estimates, Revenues Beat

Duke Energy Corporation reported fourth-quarter 2018 adjusted earnings of 84 cents per share, missing the Zacks Consensus Estimate of 89 cents by 5.6%.

Earnings also declined 10.6% year over year, due to higher depreciation and amortization expenses on a growing asset base, higher storm-related costs, and a lower tax shield on holding company interest as a result of the Tax Act.

GAAP earnings were 65 cents in the fourth quarter compared with $1 in the prior-year quarter.

For 2018, the company reported adjusted earnings of $4.72 per share, missing the Zacks Consensus Estimate by 0.63%. Full-year earnings however improved 3.3% from the previous year.

Total Revenues

Total operating revenues came in at $6,115 million, down 5.6% from $6,482 million a year ago. The figure however surpassed the Zacks Consensus Estimate of $5,612 million by 9%.

In 2018, the company’s total operating revenues were $24.52 billion, up 4% from $23.56 billion a year ago. The figure surpassed the Zacks Consensus Estimate of $24.07 billion by 1.87%.

The regulated electric unit’s revenues were $22.10 billion (up 4.34%), representing approximately 90.1% of total revenues in 2018.

Revenues from the regulated natural gas business totaled $1.77 billion, up 2.25% year over year.

Non-regulated and Other segment generated revenues of $0.65 billion, down 0.46% year over year.

Operational Update

The company’s total operating expenses were $19.75 billion in 2018, up from $17.97 billion in 2017. Costs increased on higher fuel used in electric generation and purchased power, higher natural gas, operation, maintenance and other expenses, escalated depreciation and amortization
expenses, increased property and other taxes and elevated impairment charges.

Operating income in 2018 decreased 16.7% to $4.68 billion from $5.62 billion a year ago.

Interest expenses rose to $2.09 billion from $1.98 billion in the previous year.

Quarterly Segmental Highlights

Electric Utilities & Infrastructure: Adjusted income in the fourth quarter was $628 million, up from $609 million in the year-ago quarter. The upside was driven by higher rider revenues and the contribution of rate cases in North Carolina.

Gas Utilities & Infrastructure: Adjusted income in the fourth quarter was $113 million, down from $114 million a year ago.

Commercial Renewables: This segment reported adjusted income of $13 million in the quarter compared with $15 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.

Adjusted net expenses were $149 million, up from $82 million in the year-ago quarter.

Financial Condition

As of Dec 31, 2018, the company had cash & cash equivalents of $442 million, up from $358 million as on Dec 31, 2017. Long-term debt was $51.1 billion at the end of 2018 compared with $49 billion at 2017-end.

In 2018, net cash from operating activities was $7,186 million compared with $6,624 million in the prior year.

Guidance

The company issued its earnings expectation for 2019. It expects adjusted earnings per share of $4.80-$5.20. Duke Energy extended long-term earnings growth expectation of 4-6%, through 2023.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Duke Energy has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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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