Earnings Preview: What To Expect From Duke’s Q3 Results

by Trefis Team
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Duke Energy (NYSE:DUK), the largest utility company in the United States by generation capacity, is set to publish its results for the third quarter of the fiscal year 2016 on Friday, November 4th. [1] In the previous quarter, the company’s profit rose on the back of increased net income from its regulated utilities division. It reported an earnings per share (EPS) of $1.07 for the quarter, compared to $0.95 for the second quarter of the previous year. The company’s biggest division, Regulated Utilitie, saw its earnings rise 12% to $708 million compared to $632 million in the previous year.

In recent quarters, the company has been facing a declining energy usage per customer. As home appliances become more energy efficient and utility companies compete with each other to offer customers programs that help them consume lesser energy and hence foot lower bills, energy consumption per customer has declined. The consequence has been that utility companies now compete in customer growth in order to grow their top line.

Duke has done quite well in this regard, especially in Florida and the Carolinas. In the previous quarter, the number of residential customers increased to 1.55 million in Florida, an increase of 1.7% year over year, while the number increased to 2.14 million in the Carolinas, an increase of 1.5% year over year. Compared to the 1.44% overall increase in residential customers, the company’s generated energy consumption has only increased by 0.3% over the same period.

Duke has reportedly also agreed the sale of its Brazilian power business to the Chinese company Three Gorges Corp. The company says that the deal is going to be worth around $ 1.2 billion and it will use the proceeds generated from the sale to pay down its debt. While the international business was perhaps the strongest growth area for the company, given the lower per capita consumption in the region and higher per unit rates, but its business declined sharply as the dollar rose against currencies like the Brazilian real and the Chilean peso following the collapse of the Global commodity super cycle.

As with the previous quarters, Duke’s focus going forward is on diversifying its asset portfolio. The company is targeting 33% of its electricity generation to come from wind, solar and biomass by 2020. Since per unit generation costs of energy from these sources are higher for utility companies, it will be interesting to see if the company decides to pass these costs on to the consumer and risk slow adoption or whether it chooses to take losses in order to grow customer sign up rates.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Duke Energy
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Notes:
  1. Duke Energy Investor Relations []
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