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Why Is Duke Energy (DUK) Down 3.5% 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 lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Duke Energy due for a breakout? 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 Q2 Earnings Beat, Revenues Decline Y/Y

Duke Energy reported second-quarter 2020 adjusted earnings of $1.08 per share, which surpassed the Zacks Consensus Estimate of $1.04 by 3.9%.

Including one-time adjustments, the company incurred GAAP loss of $1.13 per share,which deteriorated from the year-ago quarter’s earnings figure of $1.12.

The second-quarter results were impacted by mild weather, lower volumes from commercial and industrial customers, courtesy of the COVID-19 pandemic, along with higher depreciation on a growing asset base. Also, costs related to the abandonment of the ACP investment had an unfavorable impact.

Total Revenues

Total operating revenues came in at $5,421 million, which declined 7.7% from $5,873 million a year ago. The reported figure also missed the Zacks Consensus Estimate of $5,753 million by 5.8%.

The Regulated electric unit’s revenues were $4,963 million (down 8.5% year over year), representing 92% of total revenues in the quarter.

Revenues from the regulated natural gas business totaled $263 million, down 6.1% year over year.

The Non-regulated electric and Other segment generated revenues of $195 million, which improved 14.7% year over year.

Operational Update

Duke Energy’s total operating expenses amounted to $4,251 million in the reported quarter, down 7.1% year over year. The decline was on account of lower natural gas costs as well as reduced operation, maintenance and other expenses. Also, lower expenses related to fuel used in electric generation contributed to reduced operating expenses.

Operating income declined 9.3% to $1,177 million from $1,298 million in the year-ago quarter.

Interest expenses rose to $554 million from $542 million in the year-ago quarter.

Segmental Highlights

Electric Utilities & Infrastructure: Adjusted income in the second quarter totaled $753 million, which was lower than $809 million in the year-ago quarter.  

Gas Utilities & Infrastructure: Adjusted income at this segment totaled $50 million, up from $40 million a year ago.

Commercial Renewables: This segment recorded an adjusted income of $90 million in the quarter under review compared with $86 million in the year-ago quarter.

Other: The segment includes corporate interest expenses not allocated to other business units, results from Duke Energy’s captive insurance company and other investments.

This segment incurred an adjusted loss of $84 million compared with a loss of $115 million in the year-ago quarter.

Financial Condition

As of Jun 30, 2020, Duke Energy had cash & cash equivalents of $341 million, up from $311 million as of Dec 31, 2019. Long-term debt was $56.14 billion at the end of second-quarter 2020 compared with $54.99 billion at 2019-end.

At the end of second quarter, the company had net cash from operating activities of $3,357 million compared with $3,056 million in the year-ago period.

Guidance

Duke Energy reiterated its 2020 adjusted EPS guidance. It continues to expect adjusted earnings per share in the range of $5.05-$5.45. The Zacks Consensus Estimate for 2020 earnings is in line with the lower end of the company’s projected range.


 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Duke Energy has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, 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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