Duke Energy Corp.
) reported adjusted second quarter 2013 earnings of 87 cents per
share that came below the Zacks Consensus Estimate of 93 cents.
The quarterly earnings also fell below the year-ago figure of
$1.02 by 14.7%.
The lower numbers mainly reflect the impact of share dilution
from the Progress Energy merger and lower quarterly results at
both the Commercial Power and International Energy business
units. However, this was partially offset by favorable results at
U.S. Franchised Electric & Gas driven by the addition of
Progress Energy's utility operations.
Including Crystal River Unit 3 impairment of 26 cents per share,
nuclear development costs of 8 cents, Progress Energy merger
costs of 7 cents, litigation charges of 4 cents and
mark-to-market gain of 6 cents, the company reported earnings of
48 cents per share compared with 99 cents in the year-ago
Duke Energy's top line climbed a significant 64.4% year over year
to $5,879.0 million in the reported quarter. The reported figure
also beat the Zacks Consensus Estimate of $5,535.0 million.
On the cost front, total operating expenses were $5,059.0
million, significantly up 81% from $2,795 million in the year-ago
The company registered a considerable improvement in its
quarterly operating income to $821 million, up 4.5% year over
Quarterly Segmental Highlights
U.S. Franchised Electric and Gas:
Segment income was $590 million, up from $337 million a year ago.
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
Ohio, and lower operations and maintenance expenses. However,
these positives were partially offset by milder weather and a
decrease in the Allowance for Funds Used During Construction
equity primarily due to the completion of certain major capital
Segment income declined to $87 million from $105.0 million due to
lower volumes resulting from an extended planned maintenance
outage at National Methanol Company.
Segment loss was $3.0 million compared to segment income of $32
million in the year-ago quarter. The results reflect lesser
contribution from the Midwest coal and gas generation fleet
principally due to lower PJM capacity revenues, lower generation
volumes and the prior-year recovery of a previously written-off
receivable from Lehman Brothers.
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.
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Net expenses were $57 million, up from $18 million in the
year-ago quarter. The significant increase reflects addition of
interest expense on Progress Energy's corporate debt and
increased Duke Energy holding company interest expense.
As of Jun 30, 2013, the company held cash & cash equivalents
worth $1,571 million versus $1,424.0 million as of Dec 31, 2012.
Long-term debt decreased to $38,323 million (including current
maturities) from $38,609.0 million as of Dec 31, 2012.
Duke Energy maintained this year's adjusted earnings guidance
range of $4.20 to $4.45 per share. For the second half of 2013,
the company expects strong adjusted earnings as it implements
revised customer rates and continues to achieve efficiencies from
the merger transaction.
At the Peers
Integrys Energy Group, Inc.
) reported second quarter 2013 pro forma earnings of 45 cents per
share, up 66.7% from the year-ago quarter. Earnings also breezed
past the Zacks Consensus Estimate of 32 cents by 40.6%.
) posted net operating earnings of 23 cents per share in the
second quarter of 2013, a penny or 4.2% lower than the Zacks
Consensus Estimate. Earnings were however 4.5% higher than the
Duke Energy's bottom line failed to meet the Zacks Consensus
Estimate; however the top line easily surpassed our expectation.
Most of the growth in the top and bottom line was related to
Duke's merger with Progress Energy. The company has now begun to
Going forward, key growth drivers for the company include its
strong balance sheet, ongoing capital expansion projects and an
above industry average dividend yield. However, the
unfavorable macro backdrop, predominantly fossil-fuel based
generation assets and tepid demand for electricity remain matters
of concern. Duke Energy presently retains a short-term Zacks Rank
In the near term, we would advise investors to accumulate its
short-term Zacks Rank #1 (Strong Buy) peer
Huaneng Power International, Inc.