Earnings Review: Duke Posts Solid Q3 Numbers

by Trefis Team
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Duke Energy (NYSE: DUK), the largest utility company in the United States by generation capacity, reported its earnings for the third quarter of fiscal year 2016 on Friday, November 4th. The company reported strong growth in all three operating segments, resulting in a 11.8% growth in reported earnings per share on the back of a 5.2% growth in net revenue compared to the same quarter in the previous year.

In recent quarters, three major trends have been affecting the company’s performance, and they remained unchanged for it in this quarter as well. The first is the decline in energy consumption per customer, especially residential customers. Compared to the previous year, the total amount of electricity sold to residential customers declined by 1.7% for the company. However, the average number of customers increased by 1.4%. Additionally, efficient resource usage meant that the company cut operating costs by 2.2% year over year, resulting in a 23% increase in operating income and a 470 basis point expansion in operating margin.

duk q3

The second is the winding down of the company’s international power business. Duke investors previously considered the international energy business for the company a major growth driver since per capita energy usage in countries like Brazil and Chile was significantly lower than that in the U.S., while energy rates were slightly higher. Driving efficiencies in this segment could have helped the company grow its revenue significantly. But the result of a collapse in energy demand from this region – prompted by the decline in these economies as a result of falling commodity import demand from China – has caused the company to reconsider, and decided to sell off its assets in Brazil to China-based Three Gorges Corporation.

Thirdly, the company is focused on diversifying its energy portfolio, and including more assets from renewable energy sources like solar, wind and biomass in it. Given the company’s larger balance sheet, scale of operations and the under penetrated nature of most solar markets, it is especially well positioned on making good on its investments in this regard.

Have more questions about Duke? See the links below:

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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