Duke Energy’s Earnings Preview: The Major Trends That Will Impact Q2 Results

Duke Energy, the largest U.S. power company by generation capacity, is set to report its second quarter earnings results on August 3. ^[1] As the company divested its International Energy business towards the end of 2016, the company’s results in Q2 2017 are not directly comparable with those in the corresponding period of last year. In this article, we will discuss the major trends driving the company’s business that will impact its earnings results.

The company has been facing declining energy usage per customer amid rising energy efficiency of home appliances, the implementation of more energy-efficient building codes and standards, and competition from alternative sources of generation such as distributed solar generation. In addition, driven by customer expectations, utilities such as Duke have been offering various solutions for lowering energy consumption, thus translating into lower bills. Thus, with declining energy usage per customer, revenue growth for utilities is largely dependent on a growing customer base. Rising economic activity and a recovery in the housing market has helped drive growth in the company’s customer base, which is usually lower than the rate of economic growth. In the backdrop of steady economic growth, we expect year-over-year residential customer additions in Q2 to remain at similar levels to the 1.4% reported in Q1. ^[2]

Given the subdued top line growth expectations, cost management is essential for utilities. The company continues to invest in modernizing its transmission grid, which translates into more reliable electricity supply in addition to generating cost savings. Besides grid modernization, the company continues to diversify its generation portfolio, incorporating a larger share of natural gas based and renewable energy generation. Both the company’s gas based and renewable energy portfolios grew substantially through the inorganic route over the past couple of years driven by the acquisitions of Piedmont Natural Gas and REC Solar Corp. We would be looking out for the management’s latest efforts to further these strategic objectives during the earnings conference call.

Have more questions about Duke? See the links below:

• Why Duke Just Bought This Solar Energy Portfolio In California
• How Is Duke Energy’s Business Distributed Geographically

Notes:

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1. Investors Section, Duke Website [↩]
2. Duke’s Q1 2017 Earnings Presentation, Duke Website [↩]