On Mar 5, 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 Rank #3, 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.
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.
Looking at the earnings surprise history, the company has
steadily beaten the Zacks Consensus Estimates in the past four
quarters. The average positive surprise in the trailing four
quarters comes to 5.5%.
On the flip side, market apprehensions remain after the aftermath
of Hurricane Sandy. New Jersey, where Duke Energy has about 65%
of its customers, was hit hardest by Sandy. Also, following the
fourth quarter earnings release, analysts apprehending a
continuing trend of stable demand, weak prices and sluggish
economic recovery remained on the sidelines.
For the first and second quarters of 2013, the Zacks Consensus
Estimates for earnings are $1.05 and 96 cents per share,
respectively. This reflects respective year-over-year fall of
7.9% and 5.7%.
Other Stocks Worth Considering
Other stocks worth considering in the utility industry are
Brookfield Infrastructure Partners L.P.
Pike Electric Corporation
). These stocks sporting a Zacks Rank #1 (Strong Buy) have the
potential to rise significantly from current levels.
AMER ELEC PWR (AEP): Free Stock Analysis
BROOKFIELD INFR (BIP): Free Stock Analysis
DUKE ENERGY CP (DUK): Free Stock Analysis
PIKE ELECTRIC (PIKE): Free Stock Analysis
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