Friday, August 15, 2014 9:17:33 AM
Aug. 15, 2014 9:00 AM ET | About: Duke Energy Corporation (DUK), Includes: SPY
Disclosure: The author is long DUK, SPY. (More...)
Summary
The stock price is fairly valued on 2014 guidance and on 2015 earnings estimates.
I calculate the risk/reward ratio to be a bit favorable right now.
The company announced earnings last week which beat Street estimates and the company raised full year guidance; an excellent recipe for a stock price increase.
The last time I wrote about Duke Energy (NYSE:DUK) I stated, "Due to the tiring high dividend payout ratio, low earnings growth potential, and deteriorating financial efficiency ratios, I'm not going to be pulling the trigger right now." Since the article was published the stock has increased 2.56% versus the 2.85% gain the S&P 500 (NYSEARCA:SPY) posted. Duke Energy Corp is an energy company, operating through its direct and indirect wholly owned subsidiaries.
On August 7, 2014, the company reported second quarter earnings of $1.11 per share, which beat the consensus of analysts' estimates by $0.13. In the past year, the company's stock is up 1.85% excluding dividends (up 6.25% including dividends) and is losing to the S&P 500, which has gained 15.58% in the same time frame. Since initiating my position back on May 28, 2013, I'm up 3.05% inclusive of reinvested dividends and dollar cost averaging. With all this in mind, I'd like to take a moment to evaluate the stock to see if right now is a good time to purchase more for the utilities sector of my dividend portfolio.
Fundamentals
The company currently trades at a trailing 12-month P/E ratio of 26.5, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 15.14 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (6.48), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 4.09%. Below is a comparison table of the fundamental metrics for the company for when I wrote all articles pertaining to the company.
(click link for charts/tables)
Article Date
Price ($)
TTM P/E
Fwd P/E
EPS Next YR ($)
Target Price ($)
PEG
EPS next YR (%)
15Aug13
69.02
24.56
15.14
4.56
68
4.42
2.19
06Oct13
66.43
23.73
14.58
4.56
68
4.21
5.63
07Nov13
72.92
26.04
16.01
4.56
68
4.44
5.86
23Feb14
71.49
21.28
15.06
4.75
71
5.08
4.19
26May14
70.28
25.84
14.78
4.76
71
6.93
3.73
14Aug14
72.08
26.5
15.14
4.76
71
6.48
4.09
Financials
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 4.33% with a payout ratio of 115% of trailing 12-month earnings while sporting return on assets, equity and investment values of 1.7%, 4.7% and 4.5%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 4.33% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 10 years at a 5-year dividend growth rate of 2.7%. Below is a comparison table of the financial metrics for when I wrote all articles pertaining to the company.
Article Date
Yield (%)
Payout TTM (%)
ROA (%)
ROE (%)
ROI (%)
15Aug13
4.52
92
2.1
5.8
3.0
06Oct13
4.70
111
1.8
4.9
3.0
07Nov13
4.28
111
1.8
4.9
3.0
23Feb14
4.36
93
2.1
5.9
3.0
26May14
4.44
115
1.7
4.7
4.5
14Aug14
4.33
115
1.7
4.7
4.5
Technicals
(click to enlarge)(click link for charts/tables)
Looking first at the relative strength index chart [RSI] at the top, I see the stock in middle-ground territory with a current value of 54.27. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is below the red line with the divergence bars increasing in height indicating bullish momentum. As for the stock price itself ($72.08), I'm looking at $73.31 to act as resistance and $71.67 to act as support for a risk/reward ratio which plays out to be -0.57% to 1.71%.
The Stock Is On Fire This Past Week
During the past week the stock has increased 2.1% versus the S&P500 which has gained 2.37%. Yes, the stock is on fire because the fact it's a utility and it is matching the broader market. The reason for this run-up in the stock is because the company reported earnings last week which beat expectations and they raised full-year guidance. Earnings increased 80% from this time last year in large part to higher revenues from its rate regulated utilities. The international segment of the business benefited from reorganizing operations in Chile which helped realize a tax benefit. The earnings guidance was increased from $4.45 to $4.60 to a new range of $4.50 to $4.65. Despite the increase in earnings guidance I believe the stock to be fairly valued based on the low point of the range.
Conclusion
The company had a pretty good quarterly earnings report last week and it moved up on the announcement. With all the uncertainty of geopolitical tensions I believe this company should be insulated from what's going on in Europe and Asia. Fundamentally, I believe the stock to be fairly valued on next year's earnings estimates but expensively valued on earnings growth potential. Financially, the dividend is pretty big, and doesn't have much room to grow. On a technical basis the risk/reward ratio shows me a bit more reward right. I won't be buying any shares right now but will keep it on the radar in case it comes down again.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
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http://seekingalpha.com/article/2426575-high-yielding-duke-energy-provides-a-good-entry-point-right-now?uprof=46
DUK
Recent DUK News
- Duke Energy, Tampa Bay Rays team up with $100,000 donation to help Florida customers pay their energy bills • PR Newswire (US) • 09/19/2024 05:26:00 PM
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- Strengthening community resilience: Duke Energy Foundation tops $19.5 million in disaster readiness and recovery investments • PR Newswire (US) • 09/12/2024 01:15:00 PM
- Duke Energy's ready to respond during peak of hurricane season; advanced technology saved 12.5 million minutes of customer outages during Hurricane Debby • PR Newswire (US) • 09/10/2024 02:22:00 PM
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- Duke Energy Carolinas customer rates to drop 3.6% on Jan. 1 after North Carolina Utilities Commission issues annual fuel filing order • PR Newswire (US) • 08/28/2024 02:00:00 PM
- A new meaning to restoration: Duke Energy, Tampa Electric come together with state, local agencies to plant nearly 700 mangroves at two shorelines in Hillsborough and Pinellas counties • PR Newswire (US) • 08/27/2024 05:53:00 PM
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- Duke Energy receives approval for multiyear rate agreement • PR Newswire (US) • 08/21/2024 05:35:00 PM
- Duke Energy Launches New Virtual Home Energy Assessment in North Carolina, Helping Customers Save on Energy Use • PR Newswire (US) • 08/21/2024 02:00:00 PM
- Duke Energy Florida breaks ground on new transmission training center in Sumter County to support growing workforce, infrastructure projects responsible for delivering reliable power • PR Newswire (US) • 08/20/2024 07:27:00 PM
- Revitalizing Main Street: $700,000 of new funding available to North Carolina small businesses through Duke Energy Foundation program • PR Newswire (US) • 08/15/2024 03:00:00 PM
- Duke Energy Foundation celebrates 40 years by awarding $40,000 to nonprofit organizations serving Florida • PR Newswire (US) • 08/13/2024 07:02:00 PM
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- Power restoration work underway in the Carolinas, Duke Energy continues to monitor storm conditions • PR Newswire (US) • 08/08/2024 06:55:00 PM
- Duke Energy Florida thanks customers for their patience as company wraps up rapid restoration for nearly all customers impacted by Hurricane Debby • PR Newswire (US) • 08/07/2024 08:50:00 PM
- Duke Energy ramps up support ahead of Tropical Storm Debby; donates $50,000 to the American Red Cross • PR Newswire (US) • 08/07/2024 06:49:00 PM
- Duke Energy encourages customers to prepare for Tropical Storm Debby; moves 6,900 resources to respond to heavy rain and strong winds • PR Newswire (US) • 08/06/2024 08:03:00 PM
- Duke Energy restores power for 90% of customers within 24 hours, establishes estimated time of restoration for north Florida customers impacted by Hurricane Debby • PR Newswire (US) • 08/06/2024 07:34:00 PM
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