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Duke Energy (DUK) Meets Q1 Earnings Estimates, View Same

Duke Energy Corporation DUK reported first-quarter 2016 adjusted earnings of $1.13 per share that came in line with the Zacks Consensus Estimate. Quarterly earnings, however, decreased by 8.9% year over year owing to milder winter weather, the absence of prior-year Midwest Generation results and higher winter storm costs.

Total Revenue

In the first quarter of 2016, the company’s total operating revenue was $5,622 million, down 7.3% from $6,065 million a year ago. The reported figure was below the Zacks Consensus Estimate of $6,059 million by 7.2%.

The regulated electric unit’s revenues were $5,053 million (down 7.4%), representing approximately 90% of the company’s quarterly total revenue. Revenues from the regulated natural gas business were $169 million, down from the year-ago level of $231 million. Its non-regulated electric and other segment generated revenues of $400 million, up 6.1% year over year.

Operational Update

The company’s total operating expenses were $4,298 million in the quarter, down from $4,623 million a year ago. Costs decreased on account of lower fuel expenses in both regulated (18.8% year over year) and non-regulated (44.2%) businesses, and lower cost of natural gas, which were partially offset by higher operation, maintenance and other expenses (up 4.4%) as well as depreciation and amortization expenses (up 4.8%).

Operating income during the year decreased to $1,333 million from $1,456 million a year ago.

Interest expense increased to $511 million from $403 million a year ago.

Quarterly Segmental Highlights

Regulated Utilities: Adjusted income in the quarter was $695 million, down from $774 million a year ago. The downside can be attributed to milder winter weather.

International Energy: Adjusted income of $123 million from this segment climbed from $36 million in the year-ago quarter. The growth was due to a lower tax expense and stronger results in Brazil, primarily due to improved hydrology.

Commercial Portfolio: Subsequent to the sale of the non-regulated Midwest Commercial Generation business to Dynegy Inc. DYN in Apr 2015, the segment (formerly Commercial Power) includes Duke Energy’s unregulated renewable assets as well as its commercial electric and gas transmission investments.

This segment reported an adjusted income of $27 million in the quarter compared with $101 million a year ago. The decrease was due the absence of earnings from the Midwest Generation business.

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

Adjusted net expenses were $68 million, significantly up from $30 million in the year-ago quarter.

Financial Condition

As of Mar 31, 2016, the company had cash & cash equivalents of $778 million, down from $857 million as of Dec 31, 2015. Long-term debt was $38.23 billion compared with $37.5 billion as of Dec 31, 2015.

In the first quarter, net cash from operating activities was $1,664 million compared with $1,440 million a year ago. The company’s capital expenditure was $1,701 million in the quarter, up from $1,454 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 #4 (Sell).

Peer Releases

Edison International EIX reported first-quarter 2016 results, wherein adjusted earnings of 82 cents per share came in below of the Zacks Consensus Estimate of 89 cents by 7.9%. The quarterly number also declined 8.9% from 90 cents a year ago due to weak performance at Southern California Edison.

CMS Energy Corporation CMS reported first-quarter 2016 adjusted earnings per share of 59 cents, missing the Zacks Consensus Estimate of 68 cents by 13.2%. Quarterly earnings also plunged 19.2% from the year-ago figure of 73 cents.

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