Duke Energy (DUK): Stock to Beat Q2 Earnings Estimates?

Duke Energy Corp. DUK, an electric and natural gas utility based in Charlotte, NC, is set to report second-quarter 2016 results before the opening bell on Aug 4. Last quarter, Duke Energy recorded a 0.00% earnings surprise. Let’s see how things are shaping up for this quarter.

DUKE ENERGY CP Price and EPS Surprise

DUKE ENERGY CP Price and EPS Surprise | DUKE ENERGY CP Quote

Why a Likely Positive Surprise?

Our proven model shows that Duke Energy is likely to beat earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates, and Duke Energy has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.00%. This is because the Most Accurate estimate stands at $1.02, while the Zacks Consensus Estimate is pegged slightly lower at $1.00. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: Duke Energy’s Zacks Rank #2, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

Conversely, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

What’s Driving the Better-than-Expected Earnings?

Duke Energy’s stable regulated operations, systematic capital investment program and renewable asset expansion are tailwinds. The company has undertaken several projects and plans to invest about $25 billion to $30 billion over the 2016–2020 time frame. It must be noted here that the company anticipates capital investment of $9.225 billion in 2016, along with additional investments, to support its targeted earnings growth rate of 4–6% through 2020.

The company expects 2016 earnings to be in the range of $4.50–$4.70 per share. Duke Energy is in the midst of a portfolio transition with the sale of its international business and the acquisition of Piedmont, on both of which the company expects to make substantial progress in 2016.

Moreover, above-average summer temperatures at its service territories might positively impact its second-quarter sales.

For the second quarter, the Zacks Consensus Estimate for earnings is $1.00 a share, reflecting an increase of 5.71% year over year, while consensus revenues are pegged at $5.75 billion, implying 2.89% year-over-year growth.

Other Stocks to Consider

Here are a few other players in the utility space, which also have the right combination of elements to post an earnings beat this quarter:

AES Corp. AES has an Earnings ESP of +11.11% and a Zacks Rank #3. It is slated to report earnings on Aug 5.

Entergy Corporation ETR has an Earnings ESP of +6.73% and a Zacks Rank #3. It is expected to report earnings on Aug 2.

Avista Corp. AVA has an Earnings ESP of +2.33% and a Zacks Rank #2. It is expected to report earnings on Aug 3.

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