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's annual Impact Report shares progress toward a cleaner tomorrow that includes affordability and reliability • PR Newswire (US) • 04/24/2024 02:05:00 PM
- Duke Energy to hold annual shareholders meeting online May 9 • PR Newswire (US) • 04/23/2024 12:57:00 PM
- Duke Energy celebrates Earth Day with $500,000 in grants to boost environmental resiliency across North Carolina • PR Newswire (US) • 04/22/2024 01:33:00 PM
- Duke Energy Florida's tree care practices prevent outages, earn 18th consecutive year of national recognition • PR Newswire (US) • 04/19/2024 05:30:00 PM
- People behind the power: What to know about the remarkable role of Duke Energy lineworkers • PR Newswire (US) • 04/16/2024 06:34:00 PM
- As storm season begins, Duke Energy reminds public to move over, slow down as they approach utility crews working along the roadside • PR Newswire (US) • 04/15/2024 12:30:00 PM
- Duke Energy celebrates Florida lineworkers of the past, present and future ahead of National Lineworker Appreciation Day • PR Newswire (US) • 04/11/2024 02:45:00 PM
- Duke Energy to announce first-quarter financial results on May 7 • PR Newswire (US) • 04/11/2024 12:00:00 PM
- Duke Energy Florida to reduce rates for a second time this year, beginning this June • PR Newswire (US) • 04/08/2024 02:39:00 PM
- Duke Energy to sell stake in Pioneer Transmission joint venture to John Laing • PR Newswire (US) • 04/04/2024 08:05:00 PM
- Duke Energy to implement new PowerPair pilot program for pairing home solar installations with battery energy storage • PR Newswire (US) • 04/04/2024 06:18:00 PM
- A stronger electric grid, enhanced customer services and environmental obligations are some of the drivers of Duke Energy's Indiana rate request • PR Newswire (US) • 04/04/2024 04:43:00 PM
- Duke Energy Florida files for new base rates; announces fuel filing to reduce rates in 2024, expects overall lower customer bills in 2025 • PR Newswire (US) • 04/02/2024 02:18:00 PM
- Piedmont Natural Gas files rate adjustment in North Carolina for capital investments to better serve customers • PR Newswire (US) • 04/01/2024 09:19:00 PM
- Know what's below - Piedmont Natural Gas, Duke Energy remind customers and professional excavators to call 811 before digging • PR Newswire (US) • 04/01/2024 01:00:00 PM
- Duke Energy celebrates Opening Day with the Tampa Bay Rays by pledging to raise funds for Florida customers facing financial hardships • PR Newswire (US) • 03/27/2024 05:45:00 PM
- Duke Energy's Carolinas Lineman's Rodeo qualifies 30 local lineworkers to compete in international event • PR Newswire (US) • 03/26/2024 06:40:00 PM
- Duke Energy Progress looks to add solar power in eastern South Carolina as part of diverse plan to support booming growth • PR Newswire (US) • 03/22/2024 04:09:00 PM
- Duke Energy and Piedmont Natural Gas celebrate natural gas employees on Natural Gas Utility Workers' Day • PR Newswire (US) • 03/18/2024 01:29:00 PM
- Duke Energy appoints Harry Sideris president of company • PR Newswire (US) • 03/15/2024 12:33:00 PM
- Duke Energy supports Florida customers with $150,000 in grants to programs aimed at providing stability • PR Newswire (US) • 03/14/2024 02:25:00 PM
- Duke Energy's Florida Lineman's Rodeo qualifies 15 local lineworkers to compete in international event • PR Newswire (US) • 03/05/2024 06:27:00 PM
- Duke Energy supports first responders with $500,000 in grant opportunities for emergency preparedness in South Carolina • PR Newswire (US) • 02/27/2024 04:07:00 PM
- Duke Energy celebrates Black History Month with $75,000 in grants supporting community and cultural programs in South Carolina • PR Newswire (US) • 02/15/2024 03:09:00 PM
- Duke Energy supports fellow first responders with more than $200,000 in grants for emergency preparedness in Indiana • PR Newswire (US) • 02/15/2024 02:23:00 PM
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