Duke Energy Earnings Miss, Riddled by Items

Net income for the third quarter was $1.27 billion, compared to $1.01 billion in the same period in the previous year.

The company reiterated earnings guidance for the 2014 full year of $4.50 to $4.65 per share. The consensus estimates for the full year are $4.59 in earnings per share and $25.83 billion in revenue.

Duke’s report may look like disappointing at first glance. The reality is that Duke’s stock came within two cents of an all-time high on Tuesday, and the report literally has many issues inside of units that may have skewed the report.

Regulated Utilities recognized an adjusted segment income for this past quarter of $920 million, which remained relatively flat from the previous year. Favorable weather and increased pricing in the quarter drove up earnings, but they were offset by higher depreciation and interest expense, among other things.

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International Energy had an adjusted segment income of $80 million, versus the $116 million from the third quarter in 2013. The primary driver for these decreased earnings was unfavorable results in Latin America, such as lower volumes and higher purchased power costs.

Commercial Power reported an adjusted segment income for the third quarter of $51 million, up from $15 million in the previous year. The increase was due to higher results from the Midwest coal and gas generation fleets.

Duke was assessed a $477 million charge, or $0.43 per share, in the third quarter. This was a pretax reversal of a previously recognized impairment charge related to the sale of Duke’s Midwest generation business to Dynegy.

CEO Lynn Good said:

Our generation assets performed well during the third quarter, led by the nuclear fleet’s record 98 percent capacity factor.

We also achieved several milestones in our growth strategy as we prepare to serve the evolving needs of our customers into the future. We’re investing in solar projects and new natural gas generation; planning a major grid modernization in Indiana; and proposing to invest in the Atlantic Coast Pipeline that will bring diverse natural gas supplies to eastern North Carolina.

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Recent analyst calls: Duke was upgraded to Outperform from Neutral by Wells Fargo on September 16. CRT Capital reiterated a Buy rating and lifted its price target to $84 from $77 on November 3.

Shares of Duke closed Tuesday down about 0.2% at $82.23. Following the release of the earnings report, the initial response in the premarket was negative and shares were down about 1% at $81.50.