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Duke Energy (DUK) Q4 Earnings: Disappointment in Store?

Duke Energy Corp.DUK , an electric and natural gas utility based in Charlotte, NC, is set to report fourth-quarter and full-year 2016 results before the opening bell on Feb 16.

Last quarter, the company recorded a positive earnings surprise of 7.69%. Moreover, the company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average surprise being 1.55%

Let's see how things are shaping up at the company prior to this announcement.

Factors at Play

Being a premier utility service provider, Duke Energy continues to expand its domestic infrastructure business. In this connection, the company completed acquisition of Piedmont Natural Gas during the onset of the fourth quarter for $5 billion, which is expected to contribute 3-5 cents to earnings in the fourth quarter.

On the other hand, at the end of the fourth quarter, Duke Energy sold its Brazilian assets for $1.2 billion as well as its remaining assets in Latin America. This decision was in line with the company's strategy to completely exit Latin America and focus on its core regulated domestic operations. The sale of its Latin American assets is expected to fetch $1.9 billion, which will be utilized to pay off debt.

Meanwhile, Duke Energy signed an agreement with Siemens to offer operations and maintenance services for multiple wind turbine brands of North American wind farm owners. This deal will help customers with multiple wind turbine brands stay competitive and derive maximum value from their assets.

With respect to inorganic growth, the company acquired the 13-megawatt Victory Solar Power Project in Adams County, CO, during the fourth quarter, marking the 50th solar project in the company's growing U.S. renewables footprint. These recent investments in energy infrastructure will help Duke Energy offer affordable, reliable and cleaner energy to customers.

Considering these positives, the company currently expects 2016 earnings toward the high end of its guidance of $4.50-$4.70 per share.

On the flip side, Duke Energy announced that effective Dec 1, 2016, the charge for a typical residential customer using 1,000 kilowatt-hours (kWh) of electricity will reduce to $103.23 from $110.04 per month, reflecting savings of $6.81. This might have dented the company's profits from electricity during the fourth quarter.

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 81 cents a share, reflecting a decrease of 7.06% year over year, while the consensus for revenues is at $5.86 billion, implying 17.90% year-over-year growth.

Earnings Whispers

Our proven model does not conclusively show that Duke Energy is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Duke Energy has an Earnings ESP of -1.24%. This is because the Most Accurate estimate is pegged at 80 cents while the Zacks Consensus Estimate stands at 81 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Duke Energy carries a Zacks Rank #4 (Sell). As it is we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Duke Energy Corporation Price and EPS Surprise

Duke Energy Corporation Price and EPS Surprise | Duke Energy Corporation Quote

Stocks that Warrant a Look

Here are a few players in the utility space which have the right combination of elements to post an earnings beat this quarter:

Pinnacle West Capital Corporation PNW has an Earnings ESP of +2.04% and a Zacks Rank #2. The company is expected to release its quarterly figures on Feb 24.

Portland General Electric Company POR has an Earnings ESP of +1.56% and a Zacks Rank #2. It is expected to report earnings on Feb 17. You can see the complete list of today's Zacks #1 Rank stocks here .

Entergy Corporation ETR has an Earnings ESP of +9.09% and a Zacks Rank #3. It is likely to report earnings on Feb 15.

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Entergy Corporation (ETR): Free Stock Analysis Report

Duke Energy Corporation (DUK): Free Stock Analysis Report

Portland General Electric Company (POR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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