Back to top

Analyst Blog

On January 3, we reiterated our Neutral recommendation on Duke Energy Corporation (DUK - Analyst Report) based on its stable electricity and gas operations which generate a relatively steady and growing earnings stream. The company holds a Zacks #3 Rank, which translates into a short-term Hold rating, and correlates with our long-term recommendation.

Why the Neutral Stance?

Based in Charlotte, North Carolina, Duke Energy is a diversified energy company with more than $100 billion in total assets. Its regulated utility operations serve approximately 7.1 million electric customers located in six states in the Southeast and Midwest. Its commercial power and international business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the U.S.

Moreover, with its acquisition of Progress Energy in July 2012, Duke Energy dethroned Exelon Corporation (EXC - Analyst Report) to become the largest U.S. utility in terms of market capitalization.

Duke Energy focuses on core utility operations to build its rate base through capital expenditure investments. Additionally, the company is proactively and effectively mitigating long-term environment-related risks through investment plans and constructive dialogue with policymakers. The company has also set up an electricity transmission joint venture with American Electric Power Co. Inc. (AEP - Analyst Report) to develop a 240 mile, 765-kV transmission line in Indiana. The JV –– Pioneer Transmission –– is expected to become operational in 2014. The transmission line will transmit electricity from the relatively oversupplied Midwestern Independent System Operator (MISO) to PJM Interconnection (PJM).

Looking ahead, the company’s stable outlook is supported by its strong balance sheet and ongoing capital expansion projects which add visibility to the story.

On the flip side, market apprehensions remain restrained by the aftermath of Hurricane Sandy. New Jersey, where Duke Energy has about 65% of its customers, was hit hardest by Sandy. Also, following the third quarter earnings release, analysts apprehending a continuing trend of stable demand, weak prices and sluggish economic recovery remained on the sidelines. This is substantiated by the fact that over the past month, only 1 covering analyst, revised the estimate downward for fourth quarter 2012 with no corresponding positive revision. The sideways trend also continued for full-year 2012, with no changes in estimates.

Other Stocks to Consider

Utility stocks that are currently performing well include Huaneng Power International, Inc. (HNP - Snapshot Report) and Pike Electric Corporation (PIKE - Snapshot Report). Both these companies carry a Zacks #1 Rank (Strong Buy).

 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%