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Duke Energy (DUK) Down 6% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Duke Energy Corporation (DUK - Free Report) . Shares have lost about 6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is DUK 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 catalysts.

Favorable Weather Drives Duke Energy's Q1 Earnings

Duke Energy reported first-quarter 2018 adjusted earnings of $1.28 per share, beating the Zacks Consensus Estimate of $1.15 by 11.3%. Earnings also improved 23.1% from $1.04 in the year-ago quarter.

The year-over-year upside was driven by the normalization of weather conditions from a less severe winter in the year-ago quarter. Also higher investments in the electric and gas utilities boosted earnings.

GAAP earnings were 88 cents per share in the first quarter compared with $1.02 in the prior-year quarter.

Total Revenues

In the first quarter, the company’s total operating revenues were $6.14 billion, up 7.1% from $5.73 billion in the year-ago quarter. The reported figure also surpassed the Zacks Consensus Estimate of $5.74 billion by 6.9%. The year-over-year top-line improvement was driven by higher revenues at regulated electric and regulated natural gas segments.

The regulated electric unit’s revenues were $5.3 billion (up 7.6% year-over-year), representing approximately 86.1% of total revenues in the reported quarter.

Revenues from the regulated natural gas business totaled $0.7 billion (up 8.4% year-over-year).

Non-regulated electric and Other segment generated revenues of $0.15 billion, down 11.2% year over year.

Operational Update

The company’s total operating expenses were $4.78 billion in first-quarter 2018, up 10.2% from $4.34 billion in the year-ago quarter. Costs increased on higher prices of natural gas, depreciation and amortization expenses, property and other taxes as well as impairment charges. Also, costs related to fuel used in electric generation and purchased power led to higher operating expenses.

Operating income in the reported quarter fell 10.4% to $1.26 billion from $1.40 billion in the year-ago quarter.

Interest expenses rose to $0.52 billion from $0.49 billion in the first quarter of 2017.

Quarterly Segmental Highlights

Electric Utilities & Infrastructure: Adjusted income in the first quarter was $816 million, up from $635 million a year ago. The upside was driven by favorable weather, higher retail revenues, lower income tax expense as well as lower operation and maintenance expenses.

Gas Utilities & Infrastructure: Adjusted income of $158 million at this segment demonstrated an improvement from $133 million in the year-ago quarter. The improvement was driven by customer growth and increased investments.

Commercial Renewables: This segment reported adjusted income of $20 million in the reported quarter compared with $25 million in the year-ago quarter, owing to lower wind resource.

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 $95 million, up from $67 million in the year-ago quarter.

Financial Condition

As of Mar 31, 2018, the company had cash & cash equivalents of $421 million, up from $358 million as of Dec 31, 2017. Long-term debt was $49 billion at the end of first quarter 2018, almost in line with long-term debt at 2017-end.

In the first quarter, net cash from operating activities was $1,391 million, compared with $1,246 million in the prior-year quarter.

Guidance

The company reaffirmed its earnings expectation for 2018. It continues to expect its adjusted earnings per share in the range of $4.55-$4.85.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter.

VGM Scores

At this time, DUK has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. 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.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, DUK has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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