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Why Is Duke Energy (DUK) Down 3.3% 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 3.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Duke Energy Q3 Earnings Beat, Revenues Decline Y/Y

Duke Energy reported third-quarter 2020 adjusted earnings of $1.87 per share, which surpassed the Zacks Consensus Estimate of $1.79 by 4.5%. The bottom line figure also came in 4.5% higher than the year-ago quarter’s earnings.

Including one-time adjustments, the company generated GAAP earnings of $1.74 per share, which deteriorated from the year-ago quarter’s earnings figure of $1.82.

The third-quarter bottom line was primarily impacted by charges related to partial settlements in the Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases.

Total Revenues

Total operating revenues came in at $6,721 million, which dropped 3.2% from $6,940 million a year ago. The reported figure also missed the Zacks Consensus Estimate of $6,964 million by 3.5%.

The Regulated electric unit’s revenues were $6,315 million (down 3.1% year over year), representing 94% of total revenues in the quarter.

Revenues from the regulated natural gas business totaled $214 million, down 4% year over year.

The Non-regulated electric and Other segment generated revenues of $192 million, which declined 5% year over year.

Operational Update

Duke Energy’s total operating expenses amounted to $4,909 million in the reported quarter, down 2% 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 and purchases power as well as reduced property and other taxes contributed to reduced operating expenses.

Operating income declined 6% to $1,814 million from $1,929 million in the year-ago quarter.

Interest expenses dropped to $522 million from $572 million in the year-ago quarter.

Segmental Highlights

Electric Utilities & Infrastructure: Adjusted income in the third quarter totaled $1,412 million, which was higher than $1,366 million in the year-ago quarter.  

Gas Utilities & Infrastructure: Adjusted loss at this segment totaled $8 million against adjusted income of $26 generated million a year ago.

Commercial Renewables: This segment recorded an adjusted income of $60 million in the quarter under review compared with $40 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 $103 million compared with a loss of $124 million in the year-ago quarter.

Financial Condition

As of Sep 30, 2020, Duke Energy had cash & cash equivalents of $308 million, down from $311 million as of Dec 31, 2019. Long-term debt was $56.05 billion at the end of third-quarter 2020 compared with $54.99 billion at 2019-end.

At the end of third quarter, the company had net cash from operating activities of $6,766 million compared with $5,637 million in the year-ago period.

Guidance

Duke Energy narrowed its 2020 adjusted EPS guidance. It currently expects its adjusted earnings per share to be in the range of $5.05-$5.20, compared with the earlier guided range of $5.05-$5.45. The Zacks Consensus Estimate for 2020 earnings of $5.07 per share lies below the mid-point of the company’s updated projected range.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

Currently, Duke Energy has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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

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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