Duke Energy Q3 Preview: What We’re Watching Thursday

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Duke Energy

Duke Energy (NYSE:DUK) will soon announce its third quarter results Thursday morning, and we watch it battle rising commodity costs in order to sustain healthy margins across its electricity generation facilities. Duke Energy is one of the largest electric utilities in the U.S. with approximately 35,000 megawatts of electric generating capacity in the Carolinas and the Midwest as well as natural gas distribution services in Ohio and Kentucky. Its competitors include companies like Exelon Energy Corp and Allegheny Energy (NYSE:AYE).

Our price estimate for Duke is about $19, which is roughly in line with the current market price.

See our complete analysis for Duke Energy here

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Looking for Relief in Investments

Duke has made significant investments in the past towards technological advancements in order to meet the regulatory norms and install additional capacity. The company had proposed to hike the electricity rates by 17 percent in North Carolina in order to earn additional revenues to make up for the investments. Since the company is a public utility, the approval has to come from the N.C. Utilities Commission before the rates are hiked. The rate hike will increase the revenue of Duke by $646 million. The increased spending towards project developments will continue hurt company’s bottom-line in the Q3 and the rest of the year as well.

In a separate decision, the North Carolina Utilities Commission approved a 20 cent hike in the domestic and $2.32 hike in the commercial monthly power charges in order to make up for the investments that Duke has made towards the installation of solar power panels as a part of the green initiative undertaken by the state.

While the outlook was positive at the end of the previous quarter, we can see some decline in the company’s profits for the Q3, although still higher than the 2010 numbers.

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