Duke Energy Corp. (NYSE: DUK) announced its fourth-quarter financial results in mid-February, and Argus has chosen to weigh in on this utility giant.

Argus reiterated a Buy rating for Duke and a $99 price target, which is the highest analyst price target out there. Previously, Thomson Reuters had $95 as its highest listed analyst price target. This new price target implies upside of 25% from Monday’s close of $79.26.

This call is the result of solid fundamentals. Also Duke’s rate base growth over the next four to five years is expected to be above the peer-group average, which should drive long-term earnings growth. In addition, Duke is keeping operations and maintenance (O&M) expenses in check and has agreed to sell its nonregulated generating assets in the Midwest.

Duke is expected to have an annual dividend growth of 2.0% to 2.5% over the next several years. The shares offer a solid dividend yield of about 4.1%.

Other positive fundamentals include the company’s improving balance sheet, generally positive relationship with state regulators, across-the-board operating efficiencies and well-managed nuclear-generating assets.

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In the report Argus detailed:

While the company is seeing some stabilization in total kilowatt-hour sales, we now think it will be at least 2016 before sustained kilowatt-hour sales growth returns to a meaningful level of at least 1.0%-1.1% annually. In addition, we think that management will continue to control O&M expenses, and note that the company’s nuclear generating units are operating on average at nearly 97.8% of capacity. The company is also generating cost synergies from its July 2012 merger with Progress Energy. We also take into account projected fuel savings from Duke’s recent purchase of the North Carolina Eastern Municipal Power Agency’s nuclear generating assets. As such, our 2015 adjusted EPS [earnings per share] estimate is $4.80.

In the opinion of Argus, the expected increase in construction spending for new power plants, infrastructure improvements and alternative energy projects should have little, if any, impact on Duke’s future earnings growth.

However, Duke is now benefiting from positive changes in its electric rate structures, which the firm believes will improve the company’s balance sheet, grow cash flow and offer an attractive dividend yield of about 4.1%, making the shares a sound long-term holding for income-oriented investors.

Argus has put a Medium financial strength rating on Duke, which is the midpoint on a five-point scale. The company’s debt is investment grade. At the end of 2014, common stock comprised 52.4% of Duke Energy’s permanent capitalization and long-term debt, 47.6%. Total debt outstanding came to $42.315 billion at the end of 2014, including $37.212 billion of long-term debt.

Earnings covered interest on total debt by a factor of 2.4 at the end of 2014. Cash and cash equivalents were $2.036 billion at the end of 2014, compared to $1.501 billion at the end of 2013. Operating cash flow totaled $6.586 billion in 2014, compared to $6.382 billion in 2013.

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Duke shares backed off of an all-time high in late January of $89.97. The stock fell as much as 12% to Monday’s close of $79.26. If we look back even further, over the past three months, Duke shares have gained 1%, compared to an advance of 2% for the S&P 500. Over the past 52 weeks, the shares have advanced 11%, compared to a gain of 14% for the index. The five-year track record shows an increase of 60% for Duke shares, versus 85% for the S&P 500.

Duke projects 2015 adjusted EPS of $4.55 to $4.75, compared to the Argus estimate of $4.80 and the Thomson Reuters consensus estimate of $4.70. Duke also expects long-term average annual EPS growth of 4% to 6% through 2017. For 2016 Argus projects an EPS of $4.95, compared to the consensus earnings estimate of $4.94 per share.

Shares of Duke were up 0.5% at $79.64 at midday Tuesday. The stock has a consensus analyst price target of $83.64 and a 52-week trading range of $68.10 to $89.97.

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