Duke Energy (DUK) Tops Q2 Earnings Estimates, View Same

Duke Energy Corporation (NYSE:DUK) reported second-quarter 2016 adjusted earnings of $1.07 per share that came in above the Zacks Consensus Estimate of $1.01 by 5.9%. Quarterly earnings also improved 12.6% year over year owing to higher retail revenues from pricing and rider recoveries, lower expenses, and higher contribution from the North Carolina Eastern Municipal Power Agency (NCEMPA) acquisition.

Total Revenue

In the second quarter of 2016, the company’s total operating revenue was $5,484 million, down 1.9% from $5,589 million a year ago. The reported figure was below the Zacks Consensus Estimate of $5,751 million by 4.6%.

The regulated electric unit’s revenues were $4,965 million (down 2.5%), representing approximately 90.5% of the company’s quarterly total revenue. Revenues from the regulated natural gas business were $97 million, up from the year-ago level of $96 million. Its non-regulated electric and other segment generated revenues were $422 million, up 4.7% year over year.

Operational Update

The company’s total operating expenses were $4,344 million in the quarter, down from $4,356 million a year ago. Costs decreased on account of lower fuel expenses in both regulated (12.3% year over year) and non-regulated (30.5%) businesses, and lower cost of natural gas, which were partially offset by higher operation, maintenance and other expenses (up 0.6%) as well as depreciation and amortization expenses (up 2.9%).

Operating income during the quarter decreased to $1,145 million from $1,246 million a year ago.

Interest expense increased to $500 million from $403 million a year ago.

Quarterly Segmental Highlights

Regulated Utilities: Adjusted income in the quarter was $718 million, up from $632 million a year ago. The upside can be attributed to higher pricing and riders, lower expenses and higher wholesale net margins.

International Energy: Adjusted income of $43 million from this segment dropped from $52 million in the year-ago quarter. The decline was due to a higher tax expense and weak results at National Methanol Company.

Commercial Portfolio: This segment reported an adjusted income of $14 million in the quarter compared with $11 million a year ago. The rise was led by increased investments in the Atlantic Coast and Sabal Trail pipelines.

Other: The segment includes corporate interest expenses not allocated to other business units, results from Duke Energy’s captive insurance company, other investments, and income tax levelization adjustments.

Adjusted net expenses were $36 million, down from $37 million in the year-ago quarter.

Financial Condition

As of Jun 30, 2016, the company had cash & cash equivalents of $676 million, down from $857 million as of Dec 31, 2015. Long-term debt was $39.93 billion compared with $37.5 billion as of Dec 31, 2015.

In the first half of 2016, net cash from operating activities was $3,206 million compared with $2,879 million a year ago. The company’s capital expenditure was $1,825 million in the quarter, up from $1,735 million a year ago.

Guidance

The company maintained the 2016 earnings guidance in the range of $4.50 to $4.70 per share.

Zacks Rank

Duke Energy presently holds a Zacks Rank #3 (Hold).

Peer Releases

DTE Energy Company (NYSE:DTE) reported second-quarter 2016 operating earnings per share of 98 cents, beating the Zacks Consensus Estimate of 90 cents by 8.9%. Reported earnings were also up 28.9% from the year-ago figure of 76 cents.

PG&E Corporation’s (NYSE:PCG) adjusted operating earnings per share of 66 cents in the second quarter of 2016 lagged the Zacks Consensus Estimate of 94 cents by 29.8%. Earnings also declined 27.5% from 91 cents reported in the year-ago quarter.

Public Service Enterprise Group Inc. (NYSE:PEG) reported second-quarter 2016 operating earnings of 57 cents per share, in line with both the Zacks Consensus Estimate and with the year-ago figure. On a GAAP basis, quarterly earnings were 37 cents per share, down from 68 cents a year ago.