On January 3, we reiterated our Neutral recommendation on
Duke Energy Corporation
) based on its stable electricity and gas operations which
generate a relatively steady and growing earnings stream. The
company holds a Zacks #3 Rank, which translates into a short-term
Hold rating, and correlates with our long-term recommendation.
Why the Neutral Stance?
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.
Moreover, with its acquisition of Progress Energy in July 2012,
Duke Energy dethroned
) to become the largest U.S. utility in terms of market
Duke Energy focuses on core utility operations to build its rate
base through capital expenditure investments. Additionally, the
company is proactively and effectively mitigating long-term
environment-related risks through investment plans and
constructive dialogue with policymakers. The company has also set
up an electricity transmission joint venture with
American Electric Power Co. Inc.
) to develop a 240 mile, 765-kV transmission line in Indiana. The
JV -- Pioneer Transmission -- is expected to become operational
in 2014. The transmission line will transmit electricity from the
relatively oversupplied Midwestern Independent System Operator
(MISO) to PJM Interconnection (PJM).
Looking ahead, the company's stable outlook is supported by its
strong balance sheet and ongoing capital expansion projects which
add visibility to the story.
On the flip side, market apprehensions remain restrained by the
aftermath of Hurricane Sandy. New Jersey, where Duke Energy has
about 65% of its customers, was hit hardest by Sandy. Also,
following the third quarter earnings release, analysts
apprehending a continuing trend of stable demand, weak prices and
sluggish economic recovery remained on the sidelines. This is
substantiated by the fact that over the past month, only 1
covering analyst, revised the estimate downward for fourth
quarter 2012 with no corresponding positive revision. The
sideways trend also continued for full-year 2012, with no changes
Other Stocks to Consider
Utility stocks that are currently performing well include
Huaneng Power International, Inc.
Pike Electric Corporation
). Both these companies carry a Zacks #1 Rank (Strong Buy).
AMER ELEC PWR (AEP): Free Stock Analysis
DUKE ENERGY CP (DUK): Free Stock Analysis
EXELON CORP (EXC): Free Stock Analysis Report
HUANENG POWER (HNP): Free Stock Analysis
PIKE ELECTRIC (PIKE): Free Stock Analysis
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