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Why Is Duke Energy (DUK) Down 3.1% 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 lost about 3.1% 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 Q3 Earnings Top Estimates, Revenues Up Y/Y

Duke Energy Corporation reported third-quarter 2019 earnings of $1.79 per share, which surpassed the Zacks  Consensus Estimate of $1.69 by 5.9%. The bottom line also improved 8.4% year over year, driven by higher revenues and  operating income growth.

Total Revenues

Total operating revenues came in at $6,940 million, up 4.7% from $6,628 million a year ago. The reported figure also exceeded the Zacks Consensus Estimate of $6,816 million by 1.8%.

The Regulated electric unit’s revenues were $6,515 million (up 4.8% year over year), representing 93.9% of total  revenues in the quarter.

Revenues from the regulated natural gas business totaled $223 million, down 3% year over year.

The Non-regulated and Other segment generated revenues of $202 million, which improved 11% year over year.

Operational Update

Duke Energy’s total operating expenses amounted to $5,011 million in the reported quarter, down 1% year over year. The  decline was driven by lower natural gas costs, reduced operation, maintenance and other expenses, and decreased  impairment charges.

Operating income increased 22.2% to $1,929 million from $1,579 million a year ago.

Interest expenses rose to $572 million from $517 million in 2018’s third quarter.

Segmental Highlights

Electric Utilities & Infrastructure: Net reported income in the third quarter totaled $1,385 million, which was higher than the year-ago quarter’s $1,167 million. 

Gas Utilities & Infrastructure: Net reported income at this segment summed $26 million, up from $17 million a year ago.

Commercial Renewables: This segment witnessed a net reported income of $40 million in the quarter under review, against a net reported loss of $62 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 a net reported loss of $124 million compared with a loss of $44 million in the year-ago quarter.

Financial Condition

As of Sep 30, 2019, Duke Energy had cash & cash equivalents of $379 million, down from $442 million as on Dec 31,  2018. Long-term debt was $54.8 billion at the end of the third quarter compared with $51.1 billion at 2018-end.

In the first nine months of 2019, the company generated net cash from operating activities of $5,637 million compared  with $5,667 million in the prior year.

Guidance

Duke Energy has narrowed its 2019 adjusted EPS guidance. It expects adjusted earnings per share of $4.95-$5.15. The  Zacks Consensus Estimate for 2019 earnings is pegged at $4.98 per share, below the mid-point of the company’s  projected range. The company reaffirms long-term earnings growth target of 4-6%.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months.

VGM Scores

At this time, 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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