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Duke Energy (DUK) Down 14.3% Since Last Earnings Report: Can It Rebound?

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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 14.3% in that time frame, outperforming 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 catalysts.

Duke Energy Q4 Earnings Beat, Revenues Decline Y/Y

Duke Energy Corporation reported fourth-quarter 2019 adjusted earnings of 91 cents per share, which surpassed the Zacks Consensus Estimate of 88 cents by 3.4%. The bottom line also improved 8.3% year over year, driven by increased investments in electric and gas utilities and new renewable projects placed in service.

Including one-time adjustments, the company reported GAAP earnings of 88 cents per share compared with the year-ago figure of 65 cents.

For 2019, the company recorded adjusted earnings of $5.06 per share, which surpassed the Zacks Consensus Estimate of $5.03 by 0.6%. The bottom line also improved 34.6% from the prior year.

Total Revenues

Total operating revenues came in at $6,103 million, which dipped 0.2% from $6,115 million a year ago. The reported figure also missed the Zacks Consensus Estimate of $6,248 million by 2.3%.

In 2019, the company recorded revenues of $25.08 billion, up 2.3% from $24.52 billion a year ago. The full-year figure missed the Zacks Consensus Estimate of $25.15 million by 0.3%.

The Regulated electric unit’s revenues were $5,392 million (down 0.5% year over year), representing 88.3% of total revenues in the quarter.

Revenues from the regulated natural gas business totaled $528 million, down 4.3% year over year.

The Non-regulated electric and Other segment generated revenues of $183 million, which improved 27.1% year over year.

Operational Update

Duke Energy’s total operating expenses amounted to $4,990 million in the reported quarter, down 4.8% year over year. The decline was on account of lower natural gas costs, reduced operation, maintenance and other expenses, lower impairment charges, as well as reduced property and other taxes.  Also, lower expenses related to fuel used in electric generation and purchased power contributed to reduced operating expenses.

Operating income increased 27.3% to $1,929 million from $1,109 million in the year-ago quarter.

Interest expenses inched up to $547 million from $544 million in 2018’s fourth quarter.

Segmental Highlights

Electric Utilities & Infrastructure: Adjusted income in the fourth quarter totaled $584 million, which was lower than 628 million reported in the year-ago quarter.  

Gas Utilities & Infrastructure: Adjusted income at this segment totaled $159 million, up from $113 million a year ago.

Commercial Renewables: This segment witnessed an adjusted income of $59 million in the quarter under review compared with $13 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 $248 million compared with a loss of $149 million in the year-ago quarter.

Financial Condition

As of Dec 31, 2019, Duke Energy had cash & cash equivalents of $311 million, down from $442 million as of Dec 31, 2018. Long-term debt was $54.99 billion at the end of 2019 compared with $51.12 billion at 2018-end.

During 2019, the company generated net cash from operating activities of $8.21 billion compared with $7.19 billion in 2018.

Guidance

Duke Energy issued its 2020 adjusted EPS guidance. It expects adjusted earnings per share of $5.05-$5.45. The Zacks Consensus Estimate for 2020 earnings is pegged at $5.14 per share, below the mid-point of the company’s projected range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Duke Energy has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 #2 (Buy). We expect an above average return from the stock in the next few months.


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