Duke Energy Corporation
) announced fourth-quarter 2012 adjusted earnings of 70 cents per
share, beating the Zacks Consensus Estimate by 5 cents. However,
earnings fell below the year-ago figure by a penny.
Including the impact of costs-to-achieve the merger with Progress
Energy Inc. of 13 cents, Edwardsport charges of 2 cents, gain on
discontinued operations of 5 cents and mark-to-market gains of 2
cents, the company reported GAAP earnings per share of 62 cents
versus 65 cents per share in the year-ago period.
Duke Energy's full year 2012 adjusted earnings were $4.32 per
share, topping the Zacks Consensus Estimate of $4.13. However,
earnings were lower than the year-ago figure of $4.38. The
results were on the higher end of the 2012 guidance range of
$4.20 to $4.35. Including one-time charges of $1.25, the company
reported GAAP earnings per share of $3.07, down 19.8% year over
The results were driven by synergies from Progress Energy, net of
the impact of shares issued in connection with the merger, the
impact of the new market-based Electric Security Plan in Ohio,
and revised customer rates at Duke Energy Carolinas. However,
these were partially offset by unfavorable weather.
In full year 2012, Duke Energy generated total revenue of $19,624
million, missing the Zacks Consensus Estimate of $19,656 million.
However, the top line was above the year-ago number of $14,529
In 2012, total operating expenses were $16,514 million, up from
$11,760 million in 2011. Operating income in 2012 was $3,126, up
12.6% year over year.
U.S. Franchised Electric and Gas:
In the fourth quarter of 2012, segment income was $498 million,
up from $206 million. The results were driven by the addition of
Progress Energy's regulated utility operations in the Carolinas
and Florida, increased pricing due to revised customer rates at
Duke Energy Carolinas, and adjustments to income taxes However,
this was partially offset by higher operating and maintenance
Segment income, during the quarter under review, was $30 million,
flat year over year. The results reflect adjustments to income
taxes, lower results from the Midwest gas generation fleet offset
by lower operating and maintenance costs.
Segment income during the quarter declined to $89 million from
$96 million due to higher purchased power costs in Brazil and
unfavorable foreign exchange rates primarily in Brazil. However,
these were partially offset by increased volumes for thermal
generation in Central America due to a drier weather.
The segment includes corporate governance expenses, costs
associated with the company's 2010 voluntary employee separation
plan, costs-to-achieve the merger with Progress Energy and
results from Duke Energy's captive insurance company.
Net expenses during the quarter were $91 million, up from $17
million in the year-ago quarter. The significant increase
reflects addition of interest expense on Progress Energy's
At the end of Dec 31, 2012, the company held cash & cash
equivalents worth $1,424 million versus $2,110 million at the end
of full year 2011. Long-term debt increased significantly to
$35,499 million from $17,730 million at the end of 2011. In 2012,
the company generated $5,221 million from operating activities
versus $3,672 generated at the end of 2011.
Upcoming Event and Guidance
The company is expected to release its financial and business
outlook for 2013 and beyond, provide updates on its businesses
and report on regulatory initiatives on its investor day meeting
on Feb 28, 2013.
Duke Energy's bottom line results succeeded in beating the Zacks
Consensus Estimate. The whole of 2012 dictates the story of
achievements made by the company. In 2012, Duke Energy was loaded
with a number of project developments, especially in Arizona and
Also, the acquisition of Progress Energy Inc. proved to be a
smart move made by the company. Meanwhile, the company also made
significant progress with its fleet modernization program by
bringing online three major new power plants in North Carolina
and retiring older, less efficient coal fired units.
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Given the current pulse in the U.S. market that favors
sustainable green generation, we believe these projects would
bode well for Duke Energy going forward. However, we prefer to
remain on the sidelines due to the present unfavorable macro
backdrop, predominantly fossil-fuel based generation assets and a
tepid demand for electricity. The company presently retains a
short-term Zacks Rank #3 (Hold).
Other Stocks to Consider
Other stocks to consider are
) with a Zacks Rank #1 (Strong Buy), and
The AES Corporation
DTE Energy Company
) that carry a Zacks Rank #2 (Buy).