Duke Energy Corporation DUK reported third-quarter 2015 adjusted earnings of $1.47 per share that fell short of the Zacks Consensus Estimate of $1.52 by 3.3%. Quarterly earnings, however, increased 5% year over year owing to warmer weather compared to the previous year. Robust growth in its regulated utilities business as well as the North Carolina Eastern Municipal Power Agency (NCEMPA) acquisition also led to the increase.
GAAP earnings came in at $1.35 per share, down 25% from $1.80 per share in the third quarter of 2014. The variance between the pro forma and GAAP numbers in the reported quarter was due to a 12 cent impact from costs related to the Progress Energy merger and discontinued operations.
Duke Energy Corporation (DUK) - Earnings Surprise | FindTheCompany
Total Revenue
In the third quarter, total revenue of $6,483 million lagged the Zacks Consensus Estimate of $6,595 million by 1.7%. However, on a year-over-year basis, revenues increased 1.4%.
The regulated electric unit’s revenues were $6,017 million (up 2.7%), representing approximately 93% of the company’s total revenue. Revenues from the regulated natural gas business were $89 million, up from the year-ago level of $85 million. However, its non-regulated electric and other segment generated revenues of $377 million, down 16% year over year.
Operational Update
The company’s total operating expenses were $4,799 million in the third quarter, marginally up from $4,780 million a year ago. Costs increased on account of higher operation, maintenance and other expenses as well as higher property and other tax expenses. These were partially offset by lower fuel expenses in both regulated (0.9% year over year) and non-regulated (58.8%) businesses.
Operating income during the quarter inched up 0.4% year over year to $4,799 million.
Interest expense declined to $402 million from $405 million a year ago.
Quarterly Segmental Highlights
Regulated Utilities: Adjusted income in the quarter was $965 million, up 4.9% from $920 million a year ago. The upside can be attributed to favorable weather, higher revenues from increased pricing and riders as well as increased wholesale net margins.
International Energy: Adjusted income of $69 million from this segment dropped 13.8% from $80 million in the year-ago quarter. The decline was due to unfavorable results in Latin America, particularly impacts from the weak economy and lower demand for electricity in Brazil as well as adverse foreign currency exchange rates.
Commercial Portfolio: Subsequent to the sale of the non-regulated Midwest Commercial Generation business to Dynegy Inc. DYN in April, the segment (formerly Commercial Power) includes Duke Energy’s unregulated renewable assets as well as its commercial electric and gas transmission investments.
This segment incurred an adjusted loss of $4 million in the quarter as against earnings of $51 million a year ago. The decline was attributed to the sale of the Midwest Generation business to Dynegy, which was completed in Apr 2015.
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 $19 million, significantly down from $58 million in the year-ago quarter.
Financial Condition
As of Sep 30, 2015, the company had cash & cash equivalents of $1,370 million, significantly down from $2,036 million as of Dec 31, 2014. Long-term debt (excluding current maturities) was $37,667 million compared with $37,213 million as of Dec 31, 2014.
In the first nine months of 2015, net cash from operating activities was $5,396 million compared with $5,167 million in the same period last year. The company’s capital expenditure was $6,168 million, up from $3,836 million in the prior-year period.
Stock Repurchase Program
In connection to the sale of the Midwest Generation business to Dynegy, Duke Energy completed a $1.5 billion accelerated stock repurchase program. The program resulted in the retirement of approximately 19.8 million shares.
Guidance
The company lowered its high end of the earlier earnings guidance range to $4.55−$4.65 per share from $4.55−$4.75 per share.
Zacks Rank
Duke Energy presently holds a Zacks Rank #3 (Hold).
Peer Releases
Jackson, MI-based CMS Energy Corp. CMS reported third-quarter 2015 adjusted earnings per share of 53 cents, surpassing the Zacks Consensus Estimate of 49 cents by 8.2%. Quarterly earnings surged 55.9% from the year-ago figure primarily on the back of higher revenues and operating income.
American Electric Power Co., Inc. AEP reported third-quarter 2015 operating earnings of $1.06 per share, beating the Zacks Consensus Estimate of $1.00 by 6%.
Sempra Energy’s SRE third-quarter 2015 adjusted earnings per share came in at $1.00, ahead of the Zacks Consensus Estimate of 83 cents by 20.5%. Earnings, however, declined 28.6% from $1.39 per share in the prior-year quarter, primarily due to seasonally lower earnings at the company’s subsidiary, Southern California Gas Co.
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Click to get this free report DUKE ENERGY CP (DUK): Free Stock Analysis Report AMER ELEC PWR (AEP): Free Stock Analysis Report CMS ENERGY (CMS): Free Stock Analysis Report DYNEGY INC-NEW (DYN): Free Stock Analysis Report SEMPRA ENERGY (SRE): Free Stock Analysis Report To read this article on Zacks.com click here.