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Duke Energy (DUK) Beats on Q3 Earnings, Narrows 17' EPS View

Zacks Equity Research
Updated

Duke Energy Corporation DUK reported third-quarter 2017 adjusted earnings of $1.59 per share, beating the Zacks Consensus Estimate of $1.56 by 1.9%.

Quarterly earnings however declined 5.4% year over year due to unfavorable weather conditions and the absence of earnings from International Energy. Nevertheless, lower income-tax expense, higher retail revenues from increased pricing and riders and ongoing cost-management efforts, partially offset these adverse impacts.

The company’s GAAP earnings were $1.36 for the third quarter, compared with $1.70 in the prior-year quarter.

Duke Energy Corporation Price, Consensus and EPS Surprise

 

Duke Energy Corporation Price, Consensus and EPS Surprise | Duke Energy Corporation Quote

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Total Revenues

In the reported quarter, the company’s total operating revenues were $6,482 million, up 6.6% from $6,576 million a year ago. The reported figure also missed the Zacks Consensus Estimate of $6,745.8 million by 3.9%.

The regulated electric unit’s revenues were $6,091 million (down 3.4%), representing approximately 94% of the company’s quarterly total revenues.

Revenues from the regulated natural gas business were $247 million (up 177.5%).

Non-regulated and Other segment generated revenues were $144 million, down 21.7% year over year.

Operational Update

The company’s total operating expenses were $4,793 million in the quarter, up from $4,628 million a year ago. Costs increased on account of higher cost of natural gas, depreciation and amortization expenses, property and other taxes as well as impairment charges.

Operating income in the quarter decreased to $1,695 million from $1,954 million a year ago.

Interest expenses rose to $498 million from $464 million a year ago.

Quarterly Segmental Highlights

Electric Utilities & Infrastructure: Adjusted income in the quarter was $1,104 million, down from $1,189 million a year ago. The downside can be attributed to unfavorable weather conditons, including the lost revenues associated with Hurricane Irma as well as higher depreciation and amortization expense.

Gas Utilities & Infrastructure: Adjusted income of $19 million at this segment demonstrated an improvement from $15 million in the year-ago quarter. The upside was driven by higher earnings from investments in Atlantic Coast pipeline.

Commercial Renewables: This segment reported adjusted income of $7 million in the quarter compared with $21 million a year ago, due to lower investment tax credit within the solar portfolio and higher interest expense.

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 $20 million, down from $117 million in the year-ago quarter.

Financial Condition

As of Sep 30, the company had cash & cash equivalents of $282 million, down from $392 million as of Dec 31, 2016. Long-term debt was $48.9 billion at the end of third quarter compared with $45.6 billion as of Dec 31, 2016.

In the first nine months of the year, net cash from operating activities was $5,011 million compared with $5,611 million in the year-ago period.

Guidance

The company narrowed its earnings expectation for 2017. It expects to generate adjusted earnings per share (EPS) in the range of $4.50-$4.60, compared to prior guidance range of $4.50−$4.70.

Zacks Rank & Key Pick

Duke Energy currently carries a Zacks Rank #4 (Sell).

A better-ranked stock in the same space is CenterPoint Energy, Inc. CNP, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CenterPoint Energy has surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters, with an average beat of 10.34%.

Recent Peer Releases

PG&E Corporation’s PCG adjusted operating EPSof $1.12 in third-quarter 2017 surpassed the Zacks Consensus Estimate of 94 cents by 19.1%. Earnings were also up 19.1% from 94 cents reported in the year-ago quarter.

CMS Energy Corporation CMS reported third-quarter 2017 adjusted EPSof 62 cents, which surpassed the Zacks Consensus Estimate of 55 cents by 12.7%. Quarterly earnings however declined 11.4% from the year-ago figure of 70 cents.

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CMS Energy Corporation (CMS) : Free Stock Analysis Report
 
CenterPoint Energy, Inc. (CNP) : Free Stock Analysis Report
 
Duke Energy Corporation (DUK) : Free Stock Analysis Report
 
Pacific Gas & Electric Co. (PCG) : Free Stock Analysis Report
 
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