Duke Energy Corporation
) announced third-quarter 2012 adjusted earnings of $1.47 per
share, beating the Zacks Consensus Estimate of $1.45 while
falling behind the year-ago number of $1.50. The upsurge came
from revised customer rates, principally resulting from the
company's modernization program. This helped offset less
favorable weather and anticipated lower earnings from the
International Energy and Commercial Power segments.
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In the reported quarter, Duke Energy reported GAAP earnings per
share of 85 cents versus $1.06 per share in the year-ago period.
In the third-quarter 2012, the variance of 62 cents between
reported and adjusted earnings was due to special items and
mark-to-market impacts of economic hedges in the Commercial Power
segment (63 cents). This was partially offset by a penny from
This is the first completed quarter after the merger with
Progress Energy closed on July 2, 2012. In connection with the
merger, Progress Energy has become a wholly owned direct
subsidiary of Duke Energy.
Duke Energy generated total revenue of $6,722 million in the
reported quarter, beating the Zacks Consensus Estimate of $6,223
million. It was also above the year-ago figure of $3,964 million.
U.S. Franchised Electric and Gas: Earnings before Interest and
Taxes ("EBIT") increased to $907 million year over year from $472
million. The results were primarily driven by the addition of
Progress Energy's regulated utility operations in the Carolinas
and Florida. Additionally, quarterly results were higher due to
increased pricing and riders principally related to the
implementation of revised customer rates at Duke Energy
Carolinas, energy efficiency programs, and lower governance and
operating and maintenance costs. These results were partially
offset by less favorable weather.
International Energy: EBIT during the quarter decreased to $103
million year over year from $115 million due primarily to
unfavorable average foreign currency exchange rates.
Commercial Power: EBIT was $31 million compared with the
year-ago figure of $74 million. The variance was primarily due to
lower results for the Midwest coal generation fleet resulting
from the new market-based Electric Security Plan (ESP) in Ohio.
This was partially offset by the ESP's non-bypassable stability
charge. The new market-based ESP became effective January 1,
Other: This segment primarily includes corporate interest
expense not allocated to the business units, results from Duke
Energy's captive insurance company and income tax levelization
adjustments. Other recognized a third-quarter 2012 adjusted net
expense of $16 million, compared with an income of $5 million in
the third quarter 2011. Results decreased primarily due to the
addition of interest expense on Progress Energy's corporate debt.
At the end of the reported period, the company held cash &
cash equivalents worth $1,761 million versus $2,110 million at
year-end 2011. Long-term debt increased to $35,198 million from
$17,730 million at year-end 2011. During the first nine months of
2012, the company generated $3,979 million from operating
activities versus $3,027 million generated in the year-ago
Duke Energy remains on track to achieve its 2012 adjusted
earnings guidance range of $4.20 to $4.35 per share.
The acquisition of Progress Energy at the inception of July 2012
made Duke Energy the largest U.S. utility in terms of market
capitalization. Earlier, Chicago-based
) was the largest U.S. utility.
Based in Charlotte, North Carolina, Duke Energy is a diversified
energy company with more than $100 billion in total assets. Its
regulated utility operations serve approximately 7.1 million
electric customers located in six states in the Southeast and
Midwest. Its commercial power and international business segments
own and operate diverse power generation assets in North America
and Latin America, including a growing portfolio of renewable
energy assets in the U.S.
Duke Energy Corporation's U.S. electricity and gas operations
generate a relatively stable and growing earnings stream. Looking
ahead, the company's outlook is supported by its strong balance
sheet and ongoing capital expansion projects which add visibility
to the story.
However, valuation continues to be restrained by a number of
factors, including the present unfavorable macro backdrop,
predominantly fossil-fuel based generation assets, tepid demand
for electricity, foreign currency exchange volatility and pending
regulatory cases. The company presently retains a short-term
Zacks #3 Rank (Hold) that corresponds with our long-term Neutral
recommendation on the stock.