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Why Is Duke Energy (DUK) Up 8.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Duke Energy (DUK - Free Report) . Shares have added about 8.5% 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 catalysts.

Duke Energy Q3 Earnings Top Estimates, Revenues Up Y/Y

Duke Energy Corporation reported third-quarter 2018 adjusted earnings of $1.65 per share, which surpassed the Zacks Consensus Estimate of $1.53 by 7.8%. Quarterly earnings also improved 3.8% year over year. This upside was primarily driven by higher retail electric sales volumes and income tax benefits, partially offset by higher storm restoration costs and share dilution.

Barring one-time adjustments, the company reported GAAP earnings of $1.51 in the reported quarter compared with $1.36 in the prior-year quarter.

Total Revenue

Total operating revenues came in at $6,628 million, up 2.3% from $6,482 million a year ago. The reported figure also surpassed the Zacks Consensus Estimate of $6,345.2 million by 4.5%.

The regulated electric unit’s revenues totaled $6,216 million (up 2.1%), representing approximately 93.8% of the company’s quarterly total revenues. Revenues from the regulated natural gas business summed $230 million (down 6.98%). Moreover, its non-regulated electric and other segment generated revenues of $182 million, up 26.4% year over year.

Operational Update

Duke Energy’s total operating expenses were $5,059 million in the quarter, up from $4,827 million a year ago. Costs flared up owing to excessive fuel used in electricity generation and purchased power, operation, maintenance and other expenses, depreciation and amortization expenses as well as property and other taxes.

Consequently, operating income in the quarter decreased to $1,579 million from $1,661 million a year ago.

Interest expenses rose 3.8% to $517 million from $498 million a year ago.

Quarterly Segmental Highlights

Electric Utilities & Infrastructure: Adjusted income in the quarter was $1,175 million, up from $1,104 million a year ago. The upside can be attributed to strong weather-normal retail volumes, more favorable weather, higher rider revenues, contribution from the Duke Energy Progress (DEP) and Duke Energy Carolinas (DEC) North Carolina rate cases as well as lower income tax expense.

Gas Utilities & Infrastructure: Adjusted income of $18 million at this segment demonstrated a slip from $19 million in the year-ago quarter as growth from midstream investments offset by higher O&M expense.

Commercial Renewables: This segment reported adjusted income of $26 million in the quarter compared with $7 million a year ago. Higher quarterly earnings at this segment were primarily driven by a new solar project placed in service.

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 loss were $40 million, up from $20 million in the year-ago quarter.

Financial Condition

As of Sep 30, 2018, the company had cash & cash equivalents of $303 million, down from $358 million as of Dec 31, 2017. Long-term debt (including VIEs) was $50.51 billion at the end of the third quarter compared with $49.04 billion as of Dec 31, 2017.

In the first nine months of the year, net cash from operating activities amounted to $5,667 million compared with $4,978 million in the year-ago period.

Guidance

Duke Energy narrowed its 2018 adjusted earnings guidance range to $4.65 to $4.85 per share, from the prior range of $4.55−$4.85.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Duke Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, 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

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. 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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