| Snowflake Score | |
|---|---|
| Valuation | 3/6 |
| Future Growth | 1/6 |
| Past Performance | 5/6 |
| Financial Health | 0/6 |
| Dividends | 4/6 |
DUK Stock Overview
Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States.
Duke Energy Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$93.02 |
| 52 Week High | US$116.33 |
| 52 Week Low | US$92.80 |
| Beta | 0.35 |
| 1 Month Change | -13.07% |
| 3 Month Change | -15.14% |
| 1 Year Change | -5.53% |
| 3 Year Change | -4.27% |
| 5 Year Change | 9.90% |
| Change since IPO | 121.48% |
Recent News & Updates
Buying The Dip In Duke Energy
Summary DUK has performed even better for YTD than its defensive attributes would predict. The company's focus on clean energy should support a higher valuation. The Wall Street consensus rating is neutral, but the 12-month price target is quite high relative to the current share price. The market-implied outlook (calculated from options prices) continues to be bullish. Duke Energy (DUK) has fared quite well so far in 2022, winning by not losing. Duke’s YTD total return is -1%, as compared to -22.4% for the S&P 500 (SPY), although DUK has fallen about 13% since mid-August. DUK’s market-beating performance is likely due to the strength of the utility sector, rather than to anything specific to DUK, however. The Utilities Select SPDR ETF (XLU) has a YTD total return of -0.1% (DUK is the 3rd largest holding in this ETF). It is also worth noting that DUK is currently trading below the pre-COVID 2020 high close of $102.02 on February 18, 2020. Seeking Alpha 12-Month price history and basic statistics for DUK (Source: Seeking Alpha) Looking at a 3-factor Fama-French analysis of DUK and XLU helps in understanding the contributors to their outperformance during this market downturn. Over the past 5 years (through August), DUK and XLU have betas of 0.37 and 0.49, respectively. These results show that utilities in general, and DUK specifically, are not very sensitive to moves in the broader equity market. As expected, XLU and DUK have similar loadings on the size factor ((SMB)) and on the value factor ((HML)). The negative weighting on SMB means that DUK and XLU track more with large-cap than small-cap indices. Name Ticker Beta SMB HML Annual Alpha Duke Energy Corporation DUK 0.37 -0.45 0.18 5.52% Utilities Select Sector SPDR ETF XLU 0.49 -0.44 0.09 4.13% Fama-French 3-factor weightings for DUK and XLU for the 5 years through August of 2022 (Source: Portfolio Visualizer) DUK, and to a lesser extent XLU, have a value weighting (positive HML factor). This also helps to explain DUK’s substantial outperformance vs. the broader market. Value has substantially beaten growth so far in 2022. The iShares S&P 500 Value ETF (IVE) has returned -15.5% for the YTD, as compared to -28.7% for the iShares S&P 500 Growth ETF (IVW). Even considering the factor exposures, DUK has performed well over the past year and beyond. A number of factors have contributed. First, rising fuel prices serve to encourage electrification, shifting from fossil fuel appliances to electric stoves, heat pumps, water heaters and transportation. Perhaps as significant as rising fuel prices is the growth in investor enthusiasm for non-fossil energy. One need only look at the 28.3 forward P/E for NextEra (NEE), the largest producer of wind and solar in the world, to see that the market is assigning a substantial premium to clean energy producers. DUK is focusing considerable resources on an ‘energy transition’ to non-fossil sources (see slide 21). Along with the forward-looking strategy, DUK would not have done well without producing consistent solid earnings. The earnings in recent years have been stable, with a small amount of growth. The consensus expectation for Q3 is for EPS that is almost identical to Q3 of 2021and Q3 of 2020. The consensus expectation for EPS growth over the next 3 to 5 years is 5.6% per year. ETrade Historical (4 years) and estimated future quarterly EPS for DUK. Green (red) values are amounts by which reported EPS beat (missed) the consensus expected value (Source: ETrade) DUK has a 3.99% forward dividend yield and trailing 3-, 5-, and 10-year annualized dividend growth rates of 2.0%, 2.8%, and 2.85 per year, respectively. The Gordon Growth Model indicates that expected total returns in the range 6%-7% per year are reasonable. This is very close to the trailing total returns over the past 15 years and various sub-periods therein. I last wrote about DUK on January 27, 2022, 8 months ago, at which time I maintained a buy rating. While the valuation was a bit high as compared to recent years, the overall narrative for DUK was solid, with reliable modest growth expectations. The Wall Street analyst consensus rating was predominantly neutral, and the 12-month consensus price target corresponded to a total return of 7.6% over the next year. In analyzing a stock, I also rely on the consensus outlook among buyers and sellers of options, as reflected by options prices, the market-implied outlook. The market-implied outlook to January of 2023 was slightly bullish, with expected volatility of 22.8% (annualized). Considering the neutral to bullish Wall Street consensus, the slightly bullish market-implied outlook, and the low expected volatility, as well as the very low beta, maintaining the overall buy rating was a natural choice. I also noted that selling covered calls on DUK was worth considering and that I had done this myself. Seeking Alpha Previous analysis for DUK and subsequent performance vs. the S&P 500 (Source: Seeking Alpha) In the 8 months since my analysis, DUK has dramatically outperformed the broader equity market, almost entirely due to the stock’s defensive character and the rotation to value in the face of a substantial drop in the overall equity market. As I noted in the introduction, DUK has won by not losing. For readers who are unfamiliar with the market-implied outlook, a brief explanation is needed. The price of an option on a stock is largely determined by the market’s consensus estimate of the probability that the stock price will rise above (call option) or fall below (put option) a specific level (the option strike price) between now and when the option expires. By analyzing the prices of call and put options at a range of strike prices, all with the same expiration date, it is possible to calculate a probabilistic price forecast that reconciles the options prices. This is the market-implied outlook. For a deeper explanation and background, I recommend this monograph published by the CFA Institute. I have calculated updated market-implied outlooks for DUK and compared these with the current Wall Street consensus outlook in revisiting my rating. Wall Street Consensus Outlook for DUK ETrade calculates the Wall Street consensus outlook using ratings and price targets from 7 ranked analysts who have published their views within the past 3 months. The consensus rating is neutral and the consensus 12-month price target is 17% above the current share price. The consensus price target is considerably higher than it was back in January, which accounts for the much higher expected 12-month return for the next year. The spread in the individual price targets is low, increasing confidence in the predictive value of the consensus price target. ETrade Wall Street analyst consensus rating and 12-month price target for DUK (Source: ETrade) Seeking Alpha’s version of the Wall Street consensus outlook is calculated by combining the views of 21 analysts who have published ratings and price targets over the past 90 days. The consensus rating is neutral and the consensus 12-month price target is 15.5% above the current share price. Seeking Alpha Wall Street analyst consensus rating and 12-month price target for DUK (Source: Seeking Alpha) Back in January, the Wall Street consensus rating was mixed (buy from ETrade and hold from Seeking Alpha) and the average of the two consensus price targets corresponded to an expected total return of 7.6% for the next year. Today, both ETrade and Seeking Alpha have hold ratings on DUK, but the average of the two consensus price targets equates to 20.2% expected total return. The higher expected upside is primarily due to a rising price target, which is somewhat odd given that the ratings are neutral. To expect 20% in return on a low-beta, low-volatility stock like DUK would seem to suggest a robust buy rating. The apparent disconnect is probably due to the significant drop in DUK’s share price since mid-August, which raises the expected 12-month return. Market-Implied Outlook for DUK I have calculated the market-implied outlook for DUK for the 3.8-month period from now until January 20, 2023 and for the 8.6-month period from now until June 16, 2023, using the prices of call and put options that expire on these dates. I selected these two dates to provide a view to the start and middle of 2023, as well as because the options expiring in January and June tend to be among the most liquid. The standard presentation of the market-implied outlook is a probability distribution of price return, with probability on the vertical axis and return on the horizontal. Geoff Considine Market-implied price return probabilities for DUK for the 3.8-month period from now until January 20, 2023 (Source: Author’s calculations using options quotes from ETrade) The market-implied outlook from now until mid-January of 2023 is tilted to favor positive returns. Compare, for example, the probabilities of having a +5% or +10% return to those for a -5% or -10% return. The expected volatility calculated from this distribution is 26.7% (annualized), somewhat higher than the expected volatility from my January analysis, 22.8%. This is probably mainly due to the higher current higher market volatility relative to January, rather than to something specific to DUK. To make it easier to compare the relative probabilities of positive and negative returns, I rotate the negative return side of the distribution about the vertical axis (see chart below).
If EPS Growth Is Important To You, Duke Energy (NYSE:DUK) Presents An Opportunity
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story...
Duke Energy Vs. NextEra Energy: Which Is The Better Utility Stock?
Summary The market expects the Fed to keep raising rates in the incoming Jackson Hole meeting. Such expectation pushes the 10-year treasury above the 3% level, pressuring the utility sector as a whole and also its leaders: Duke Energy and NextEra Energy. There are some positives in both stocks including their lead scales, base-rate hike and/or rate relief, and healthy volume growth. However, the valuation and risk premiums are too high under current conditions when compared to the overall market and risk-free interest rates. Comparatively speaking, Duke is the one with slightly lower risk premiums and higher return potentials. Thesis and Background Readers familiar with our writings know that we are overall very cautious about the utility sector under the current conditions. The sector has been considered a safe haven sector by traditional wisdom. However, as you will see in the next section, the sector currently is one of the riskiest sectors in our view. Interest rates act as the gravity on all asset valuation, especially on the utility sector given their reliance on debt financing and relatively heavy leverage. Of course, sometimes a sector is overvalued only because a few component stocks are extremely overvalued and cause the whole sector’s valuation out of whack. And in this case, there is no problem to invest in the sector - you just need to avoid those few stocks. You will see that it is not the case here with the utility sector after we examine two specific stocks in this sector: Duke Energy (DUK) and NextEra Energy (NEE). They are the top two leading stocks in the sector, represented by Utilities Select Sector SPDR Fund (XLU). Combined, they represent more than ¼ of the sector (25.5% to be more exact). And as you will see later, they are both overvalued by a substantial margin (somewhere between 20% to 30%) relative to their historical valuations. Their valuations are also significantly above the overall market, yet their profitability and growth potential are only a fraction of the overall market. As such, my view is that their valuation and risk premiums are too high under current conditions. And I see very unfavorable odds for them to keep up with the overall market in the years to come. However, they do have their advantages given their leading scale and generous dividends. For investors who are more income-oriented, our results show that Duke is a better option among these two. It offers a higher current income (3.57% dividend yields vs. NEE’s 1.83%), a lower valuation premium (about 20% overvaluation vs. NEE’s 30%), and a slightly higher total return potential (about 6% per annum vs. NEE’s 4.3%). And next, we will elaborate on these key points one by one in more detail. Yahoo Finance Overview of utility sector, DUK, and NEE As you can see from our following market dashboard (and you are welcome to download it here), the utility sector represented by XLU is currently the more overvalued market sector based on its yield spread relative to the risk-free rates. Its yield spread is below the historical average and is near a dangerous level in our view as indicated by the extremely negative dividend spread yield Z-score (-2.26). At the same time, its current dividend yield is also below its historical average by a good margin, by approximately 41% (as indicated in the negative dividend yield Z-score of -0.41). Interest rates act as the gravity on all asset valuation, and the Fed is very likely to keep increasing rates at the upcoming Jackson Hole meeting. Author After seeing the forest, now let’s take a look at the trees: DUK and NEE. Indeed, both are overall excellent candidates in the sector considering their safety, profitability, and financial strength. Especially for investors who are more income-oriented, both have been reliable dividend growth stocks. And their current dividends are quite attractive when compared to the overall market or treasury rates. As you can see from the following chart, NEE is currently yielding 1.83%. It is not as high as treasury rates (10-year treasury rates are about 3.1% as of this writing), but it is much higher than the dividend yield of 1.5% currently provided by the S&P 500 (by more than 20%). DUK is currently yielding 3.57%. It is therefore both higher than the treasury rates (by about 15% in relative terms) and the S&P 500 (by more than 2.3x). However, when compared to their historical track record, their current dividend yields are lower by a substantial margin, signaling considerable valuation risks. To wit, the dividend yield for NEE has fluctuated in the past years between 1.6% and 3.5% with an average of 2.55%. Therefore, its current dividend yield, although attractive in absolute terms, is actually below its historical average by almost 30% (29% to be exact). Its current yield is actually not that far away from the lowest level in the past decade. The picture for DUK is very similar. DUK’s dividend yield fluctuated in the past between 3.4% and 4.8% with an average of 4.21%. The peak yield of 5.87% that occurred during the COVID crash is obviously an outlier data point. Therefore, its current 3.57% dividend yield is below its historical average by almost 20% (18% to be exact). And also similarly, its current yield is very close to the lowest level in the past decade too (3.57% vs. 3.4%, only a difference of 17 basis points or 5% in relative terms). Given the substantial overvaluation, I am very cautious to the whole sector and also both of the leading stocks. However, for investors drawn to their generous dividend and stability, you will see next why we prefer DUK over NEE. Seeking Alpha ROE as a nominal measure of profitability First, I will use ROE, the most commonly cited profitability metric for utility stocks, to gauge their profitability. The ROE here is simply taken as their EPS divided by the book value per share. The ROE for DUK and NEE are shown in recent years below. And as can be seen, DUK’s average ROE is around 6.7%. And in contrast, NEE’s ROE has been on average 11.2%, about 1.67x higher than DUK. Therefore, by the ROE metric, NEE is 1.67x more profitable and approximately, should enjoy a 67% valuation premium – at least in terms of P/BV multiples. However, currently, NEE is valued at 4.78x P/BV and DUK at 1.79x, a difference of 2.67x. That is a valuation premium of 167% instead of 67%. Such premium is difficult to justify in my view. And next, we will see that ROE is misleading in itself as a profitability metric. Source: author based on Seeking Alpha data Profitability measured by ROCE The following chart shows a more fundamental profitability measure over a longer period of time. And as explained in our earlier writings, to us, the most important profitability measure is ROCE because it considers the return of capital ACTUALLY employed. For utilities, I considered the following items capital actually employed: 1. Working capital, including payables, receivables, inventory. These are the capitals required for the daily operation of their businesses. This is a minor part of the ROCE for utilities. 2. Gross Property, Plant, and Equipment. These are the capitals required to run their business and sell their products. This is the dominating majority part of the ROCE for utilities. As seen, the ROCE comparison paints a different picture than ROE. It is still true that NEE’s ROCE has been consistently above DUK over the long term too. NEE’s ROCE has fluctuated between about a low of 8% to as high as 10% in the past decade. And its average ROCE in recent years has been 9.3%, a remarkable level for utilities. But the superiority to DUK is not as dramatic as the ROE indicated. As seen, DUK’s ROCE has been hovering between 7.5% to 9% most of the time. And its average ROCE has been 8.3%, again lower than NEE for sure. But only lower by about 100 basis points or 10% in relative terms, in contrast to the 1.67x difference we’ve seen in ROE above. Source: author based on Seeking Alpha data Valuation and Potential returns Based on the above comparison of profitability, I find NEE’s valuation premium difficult to justify as you can see from the second chart. As aforementioned, NEE’s Price to book value ratio is at 4.78x currently, a whopping 2.67x above DUK’s 1.79x. In terms of P/E ratios, NEE’s P/E of 30.9x is more than 51% higher than DUK’s 20.3x. Given that utility stocks use relatively heavy leverages, let's consider valuation multiples adjusted by leverage, such as EV/sales and EV/EBITDA ratios. As seen, the EV/sales ratio also indicates NEE’s substantial valuation premium (11.6x vs. 5.97x) too. And the premium is even more dramatic in terms of EV/EBITDA ratios. NEE’s EV/EBITDA ratio of 36.8x on a TTM basis is more than 2.72x above DUK’s 13.5x.
Duke Energy Is My Favorite Defensive Dividend Stock
Duke Energy is one of America's largest utility companies with a 3.7% yield and a low-volatility profile. In this article, I explain why this allows the company to outperform the market and why DUK is my favorite defensive investment. Moreover, we will discuss its valuation, capital expenditures, and the expected sale of its commercial renewables. Introduction It's time to talk about Duke Energy (DUK). Duke Energy is one of America's biggest electric utility companies with a market cap of $84.0 billion. It's also one of the first five stocks I bought for my dividend growth portfolio a couple of years ago as I knew I needed and wanted defensive exposure. While DUK can be considered to be one of the most boring stocks on the market as it doesn't sell fancy products or develops breathtaking technologies, I think calling DUK "boring" is a compliment. The company is a reliable source of high income for investors thanks to regular and satisfying dividend hikes, and above all, the company does not underperform the market, which a lot of market participants seem to forget occasionally. While I have bought a lot of dividend growth stocks with a focus on growth this year, I am eagerly adding to my Duke Energy position for all the reasons I just mentioned and the fact that it has a lot of nuclear exposure. Moreover, the company is selling its solar and wind assets, which I believe is a smart move. So, with all of this in mind, let me explain why DUK is my favorite defensive investment. By the way, below is an overview of my portfolio. In case it's hard to read (click to enlarge), I put the full list in my Seeking Alpha bio. Author When Boring Is Good First, let me give you some background info that explains why high yield and low volatility make sense. In June, S&P Dow Jones Indices published an article highlighting the outperformance of the S&P 500 Low Volatility High Dividend Index. While that's obviously a way to promote their index, there is no denying that the research is worth something. The low volatility high-yield portfolio consists of the 25 lowest volatility stocks of the 75 highest-yielding S&P 500 stocks. When looking at a comparison of the past 10 years (in the table below) we see a lot of numbers. So, let's make sense of it all. Going back to January 31, 1990, the S&P 500 has been beaten by all high-yield investments, regardless of volatility. However, only one portfolio beat the S&P 500 on a risk-adjusted basis. And that's the low volatility, high-yield portfolio. This portfolio had annualized volatility of 17.3%, which helps as downside protection is key. Low-volatility stocks tend to outperform during bear markets. Even if these stocks don't always keep up during bull markets, downside protection is enough to maintain high long-term total returns. S&P Dow Jones Indices From my own experience and research, I obviously agree with the things above. After all, it's based on facts. However, it is extremely easy to buy high-yielding stocks that do not outperform as there are more high-yielding stocks on the market than low-volatility stocks with quality dividends that withstand the test of time. In other words, use this information carefully when assessing the high-yield stocks you consider buying. The good news is that Duke Energy is a perfect example of a high yield and low volatility. Going back to 2004, the company has returned 11.4% per year including dividends. This beats the Utilities Select Sector SPDR ETF (XLU) by roughly 120 basis points, which really adds up over time. It also beats the S&P 500, which returned 9.3% during this period. Moreover, the standard deviation of Duke was 14.8% during this period, which is in line with the S&P 500. That's impressive as we're comparing a single stock to a well-diversified basket of 500 stocks. Hence, Duke scores high on a volatility-adjusted basis as well (Sharpe/Sortino ratio). And, it has a very low market correlation, which helps when structuring a portfolio. It's also the reason why I will own utilities. Not because I'm fascinated by the way they generate electricity, but because it makes so much sense to own safe dividend stocks on top of more exciting dividend growth investments. Portfolio Visualizer Note that outperformance varies. Overall, we're talking about the very long-term as we can include periods of high and low inflation, recessions, economic expansions, wars, Democrat and Republican Presidents, and whatnot. Over the past 3 and 5-year intervals, Duke has not outperformed the market, but it has come very close with an almost similar standard deviation, which is impressive as the past 3-5 years were more favorable for tech stocks, which are a big part of the S&P 500. Portfolio Visualizer With that said, Duke brings a ton of value to the table, which supports the company's impressive returns. The Duke Dividend Duke is currently paying a $1.005 dividend per share per quarter. That's $4.02 per share per year. Based on its $109 share price, we're dealing with a yield of 3.7%. This yield is one of its lowest as the yield usually hovers somewhere above 4.0%. Moreover, the yield is roughly 70 basis points (the graph below says 60, but that number is 10 basis points too low), above the Vanguard High Dividend ETF's (VYM) yield. DUK Dividend Yield data by YCharts When incorporating Seeking Alpha's dividend scorecard, we see that the company scores very decently versus its utility peers with no grade below B. Seeking Alpha The "problem" is that the dividend growth score of B+ is mainly based on factors like EBITDA growth, which are also part of the calculations in this category. When it comes to actual dividend growth, the company scores a D+. This also explains why the company's yield is now one of the lowest of the past 10 years as capital gains have outperformed dividend growth. Over the past 10 years, dividend growth has averaged 2.8% per year. This number is 2.0% on a 3-year basis. DUK Dividend data by YCharts These are the most "recent" hikes: July 2022: 2.0% July 2021: 2.1% July 2020: 2.1% July 2019: 1.9% July 2018: 4.2% In other words, as long as inflation remains close to the Fed's target of 2.0% investors avoid losing purchasing power - ignoring reinvested dividends. With that said, there are two things worth mentioning here. First, the company has kept up with the S&P 500 despite these slow dividend growth rates. The fact that its yield is close to 4.0% is playing a major role here. Second, the company is currently investing in renewables. Duke's Value As I already briefly mentioned, Duke Energy is an $84 billion market cap giant in the utility sector. The company is the second-largest company in the regulated electric utility industry behind its Florida-based peer NextEra Energy (NEE). Through five subsidiaries, the company services Indiana, Southwest Ohio, The Carolinas, and Florida. Duke Energy In 2021, the company generated 81.3% of the power it sold to customers. 18.7% was purchased power. Just 1.5% was hydro and solar power. Roughly 30% was nuclear power. Natural gas came in slightly bigger at 31.8% with coal accounting for 18.2% of power generation. Ignoring third-party power, this is what the breakdown of the company's current generated net output in gigawatt-hours looks like. Duke Energy The company's commercial renewables produce more than 2,760 MW in 21 states. In this segment, 52% is generated by wind followed by 46% solar and just 2% fuel cell/storage. Like all major utilities, Duke Energy aims to become carbon neutral in the future. By 2030, the company aims to generate less than 5% of its energy from coal, followed by a full exit by 2035. The problem is that this is extremely expensive. Hence, the company is expected to invest more than $10 billion in capital expenditures on a constant basis. This year, for example, CapEx is expected to be $12.1 billion. While the company was able to achieve positive free cash flow prior to the aggressive energy transition, it is now unable to generate enough cash from its operations to meet investment requirements. TIKR.com What this means is that the company needs to borrow money for its CapEx plans and to pay a dividend. Normally, companies pay dividends with free cash flow. Hence, Duke Energy is expected to end up with more than $80 billion in net debt in 2024. That's up from $40 billion prior to 2015. TIKR.com On top of that, the company issues common stock to fund its operations. Over the past three years, the company issued $8.9 billion in net new debt. It also issued shares worth $3.1 billion. Over the past five years, the company increased the number of common shares outstanding by 9.9%. That's 1.9% per year. With this in mind, it's important to mention that the company does generate shareholder value. The company isn't just piling on new debt and diluting existing shareholders, but actually improving its business - at least when it comes to real dollars. The chart above doesn't just show net debt, it also shows the book value per share at the very bottom. The book value means total assets minus liabilities divided by the number of shares outstanding. In other words, it also incorporates an increasing number of shares outstanding, which is extremely important. What we see is an increase from $58.6 in 2013 to $66.9 in 2024 (expected). That's an annual compounding growth rate of 1.1%. Again, please note that this incorporates share dilution. The same goes for (expected) earnings per share (note the "per share" part). Between 2012 and 2024E, EPS is growing by 2.7% per year, which supports the average dividend growth rate. TIKR.com However, while EPS has been improving, Credit Suisse believes that slower EPS growth is likely. The bank mentioned higher interest rates when it lowered its stock price outlook. As reported by Seeking Alpha: [...] Credit Suisse downgraded shares to Neutral from Outperform with a $114 price target, following the utility's Q2 results the bank says point to an "increased risk of a re-base to the 5%-7% long-term EPS compound annual growth rate. While encouraged to see a sale of Duke's commercial renewable energy business earlier than expected, "after considering dilution from the sale and wider pressure from interest rates on Duke's variable rate debt, we see downside to consensus EPS estimates," Credit Suisse analyst Nicholas Campanella wrote. This is what the company commented on head and tailwinds in its 2Q22 earnings call: We expect third quarter adjusted earnings per share will be slightly lower than 2021, mainly due to favorable weather in the prior year, higher interest expense, tax timing and lower contributions from Commercial Renewables. This will be partially offset by higher revenues from rate cases, riders and wholesale. In the fourth quarter, we expect to see favorability from several drivers, including normal weather, higher loan, lower O&M and higher revenue from rate cases and riders. With regard to rates, we're seeing something interesting, which I will discuss in the next "segment". Valuation Higher rates are a problem for companies with a lot of debt. Utilities have a lot of debt and a high need for future funding. Hence, I do not disagree with Credit Suisse that higher rates are a reason to believe that EPS growth will weaken a bit. However, EPS growth will remain strong and investors are not ignoring utilities because of higher rates. The opposite is true. DUK is up 4% year to date. The S&P 500 is down 13%. The most recent decline in 10-year yields caused DUK to rally more than 12% from its 2022 lows. All it took was a 40 basis points decline in 10-year yields.
Shareholder Returns
| DUK | US Electric Utilities | US Market | |
|---|---|---|---|
| 7D | -10.3% | -8.1% | -2.5% |
| 1Y | -5.5% | -1.3% | -23.2% |
Return vs Industry: DUK underperformed the US Electric Utilities industry which returned -1.3% over the past year.
Return vs Market: DUK exceeded the US Market which returned -23.2% over the past year.
Price Volatility
| DUK volatility | |
|---|---|
| DUK Average Weekly Movement | 3.1% |
| Electric Utilities Industry Average Movement | 3.2% |
| Market Average Movement | 6.8% |
| 10% most volatile stocks in US Market | 15.5% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: DUK is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.
Volatility Over Time: DUK's weekly volatility (3%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1904 | 27,605 | Lynn Good | https://www.duke-energy.com |
Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States. It operates through three segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables. The Electric Utilities and Infrastructure segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest; and uses coal, hydroelectric, natural gas, oil, renewable generation, and nuclear fuel to generate electricity.
Duke Energy Fundamentals Summary
| DUK fundamental statistics | |
|---|---|
| Market Cap | US$71.62b |
| Earnings (TTM) | US$3.80b |
| Revenue (TTM) | US$26.59b |
18.9x
P/E Ratio2.7x
P/S RatioIs DUK overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| DUK income statement (TTM) | |
|---|---|
| Revenue | US$26.59b |
| Cost of Revenue | US$13.98b |
| Gross Profit | US$12.60b |
| Other Expenses | US$8.81b |
| Earnings | US$3.80b |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 4.93 |
| Gross Margin | 47.41% |
| Net Profit Margin | 14.29% |
| Debt/Equity Ratio | 136.1% |
How did DUK perform over the long term?
See historical performance and comparisonDividends
4.3%
Current Dividend Yield80%
Payout RatioValuation
Is DUK undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
3/6Valuation Score 3/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for DUK?
Other financial metrics that can be useful for relative valuation.
| What is DUK's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$71.62b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 5.5x |
| Enterprise Value/EBITDA | 12.4x |
| PEG Ratio | 2.5x |
Price to Earnings Ratio vs Peers
How does DUK's PE Ratio compare to its peers?
| DUK PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 20.6x | ||
SO Southern | 23.9x | 7.8% | US$72.3b |
AEP American Electric Power Company | 17.3x | 7.8% | US$44.4b |
EXC Exelon | 19.6x | 8.6% | US$37.2b |
XEL Xcel Energy | 21.5x | 6.7% | US$35.0b |
DUK Duke Energy | 18.9x | 7.4% | US$71.6b |
Price-To-Earnings vs Peers: DUK is good value based on its Price-To-Earnings Ratio (18.9x) compared to the peer average (20.6x).
Price to Earnings Ratio vs Industry
How does DUK's PE Ratio compare vs other companies in the US Electric Utilities Industry?
Price-To-Earnings vs Industry: DUK is expensive based on its Price-To-Earnings Ratio (18.9x) compared to the US Electric Utilities industry average (17.8x)
Price to Earnings Ratio vs Fair Ratio
What is DUK's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 18.9x |
| Fair PE Ratio | 24.6x |
Price-To-Earnings vs Fair Ratio: DUK is good value based on its Price-To-Earnings Ratio (18.9x) compared to the estimated Fair Price-To-Earnings Ratio (24.6x).
Share Price vs Fair Value
What is the Fair Price of DUK when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: DUK ($93.02) is trading above our estimate of fair value ($90.04)
Significantly Below Fair Value: DUK is trading above our estimate of fair value.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.
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Future Growth
How is Duke Energy forecast to perform in the next 1 to 3 years based on estimates from 12 analysts?
Future Growth Score
1/6Future Growth Score 1/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
7.4%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: DUK's forecast earnings growth (7.4% per year) is above the savings rate (1.9%).
Earnings vs Market: DUK's earnings (7.4% per year) are forecast to grow slower than the US market (14.8% per year).
High Growth Earnings: DUK's earnings are forecast to grow, but not significantly.
Revenue vs Market: DUK's revenue (3.7% per year) is forecast to grow slower than the US market (7.7% per year).
High Growth Revenue: DUK's revenue (3.7% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: DUK's Return on Equity is forecast to be low in 3 years time (9.5%).
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Past Performance
How has Duke Energy performed over the past 5 years?
Past Performance Score
5/6Past Performance Score 5/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
1.2%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: DUK has high quality earnings.
Growing Profit Margin: DUK's current net profit margins (14.3%) are higher than last year (12%).
Past Earnings Growth Analysis
Earnings Trend: DUK's earnings have grown by 1.2% per year over the past 5 years.
Accelerating Growth: DUK's earnings growth over the past year (31.7%) exceeds its 5-year average (1.2% per year).
Earnings vs Industry: DUK earnings growth over the past year (31.7%) exceeded the Electric Utilities industry 10.1%.
Return on Equity
High ROE: DUK's Return on Equity (7%) is considered low.
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Financial Health
How is Duke Energy's financial position?
Financial Health Score
0/6Financial Health Score 0/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: DUK's short term assets ($11.6B) do not cover its short term liabilities ($16.5B).
Long Term Liabilities: DUK's short term assets ($11.6B) do not cover its long term liabilities ($104.3B).
Debt to Equity History and Analysis
Debt Level: DUK's net debt to equity ratio (134.7%) is considered high.
Reducing Debt: DUK's debt to equity ratio has increased from 128.4% to 136.1% over the past 5 years.
Debt Coverage: DUK's debt is not well covered by operating cash flow (12%).
Interest Coverage: DUK's interest payments on its debt are not well covered by EBIT (2.5x coverage).
Balance Sheet
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Dividend
What is Duke Energy current dividend yield, its reliability and sustainability?
Dividend Score
4/6Dividend Score 4/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
4.32%
Current Dividend Yield
Dividend Yield vs Market
| Duke Energy Dividend Yield vs Market |
|---|
| Segment | Dividend Yield |
|---|---|
| Company (Duke Energy) | 4.3% |
| Market Bottom 25% (US) | 1.7% |
| Market Top 25% (US) | 4.7% |
| Industry Average (Electric Utilities) | 3.3% |
| Analyst forecast in 3 Years (Duke Energy) | 4.5% |
Notable Dividend: DUK's dividend (4.32%) is higher than the bottom 25% of dividend payers in the US market (1.67%).
High Dividend: DUK's dividend (4.32%) is low compared to the top 25% of dividend payers in the US market (4.73%).
Stability and Growth of Payments
Stable Dividend: DUK's dividends per share have been stable in the past 10 years.
Growing Dividend: DUK's dividend payments have increased over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: At its current payout ratio (79.8%), DUK's payments are covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: DUK is paying a dividend but the company has no free cash flows.
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Management
How experienced are the management team and are they aligned to shareholders interests?
3.2yrs
Average management tenure
CEO
Lynn Good (62 yo)
9.25yrs
Tenure
US$16,451,236
Compensation
Ms. Lynn J. Good has been the Chairman of the Board of Edison Electric Institute since June 2018. Ms. Good serves as the President at Duke Energy Carolinas, LLC since July 1, 2013. Ms. Good has been the Ch...
CEO Compensation Analysis
| Lynn Good's Compensation vs Duke Energy Earnings |
|---|
| Date | Total Comp. | Salary | Company Earnings |
|---|---|---|---|
| Jun 30 2022 | n/a | n/a | US$4b |
| Mar 31 2022 | n/a | n/a | US$4b |
| Dec 31 2021 | US$16m | US$1m | US$4b |
| Sep 30 2021 | n/a | n/a | US$3b |
| Jun 30 2021 | n/a | n/a | US$3b |
| Mar 31 2021 | n/a | n/a | US$1b |
| Dec 31 2020 | US$15m | US$1m | US$1b |
| Sep 30 2020 | n/a | n/a | US$2b |
| Jun 30 2020 | n/a | n/a | US$2b |
| Mar 31 2020 | n/a | n/a | US$4b |
| Dec 31 2019 | US$15m | US$1m | US$4b |
| Sep 30 2019 | n/a | n/a | US$3b |
| Jun 30 2019 | n/a | n/a | US$3b |
| Mar 31 2019 | n/a | n/a | US$3b |
| Dec 31 2018 | US$14m | US$1m | US$3b |
| Sep 30 2018 | n/a | n/a | US$3b |
| Jun 30 2018 | n/a | n/a | US$3b |
| Mar 31 2018 | n/a | n/a | US$3b |
| Dec 31 2017 | US$21m | US$1m | US$3b |
| Sep 30 2017 | n/a | n/a | US$3b |
| Jun 30 2017 | n/a | n/a | US$3b |
| Mar 31 2017 | n/a | n/a | US$3b |
| Dec 31 2016 | US$14m | US$1m | US$3b |
| Sep 30 2016 | n/a | n/a | US$3b |
| Jun 30 2016 | n/a | n/a | US$2b |
| Mar 31 2016 | n/a | n/a | US$2b |
| Dec 31 2015 | US$11m | US$1m | US$3b |
Compensation vs Market: Lynn's total compensation ($USD16.45M) is about average for companies of similar size in the US market ($USD13.04M).
Compensation vs Earnings: Lynn's compensation has been consistent with company performance over the past year.
Leadership Team
Experienced Management: DUK's management team is considered experienced (3.2 years average tenure).
Board Members
Experienced Board: DUK's board of directors are considered experienced (5.2 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: DUK insiders have only sold shares in the past 3 months.
Recent Insider Transactions
| Date | Value | Name | Entity | Role | Shares | Max Price |
|---|---|---|---|---|---|---|
| 10 Aug 22 | SellUS$76,951 | Dhiaa Jamil | Individual | 700 | US$109.93 | |
| 09 Aug 22 | SellUS$173,821 | E. McKee | Individual | 1,589 | US$109.39 | |
| 09 Aug 22 | SellUS$515,441 | Kodwo Ghartey-Tagoe | Individual | 4,700 | US$109.67 | |
| 17 May 22 | SellUS$404,325 | Ronald Reising | Individual | 3,706 | US$109.10 | |
| 25 Feb 22 | SellUS$1,971,400 | Lynn Good | Individual | 20,000 | US$98.57 | |
| 14 Feb 22 | SellUS$129,116 | Louis Renjel | Individual | 1,300 | US$99.32 | |
| 17 Nov 21 | SellUS$39,484 | Dhiaa Jamil | Individual | 400 | US$98.71 |
Ownership Breakdown
| Owner Type | Number of Shares | Ownership Percentage |
|---|---|---|
| Private Companies | 29,344 | 0.004% |
| State or Government | 328,995 | 0.04% |
| Individual Insiders | 925,942 | 0.1% |
| General Public | 276,270,290 | 35.9% |
| Institutions | 492,414,153 | 64.0% |
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
| Ownership | Name | Shares | Current Value | Change % | Portfolio % | |
|---|---|---|---|---|---|---|
| 69,514,599 | $6.5b | 1.45% | 0.16% | |||
| 53,801,201 | $5.0b | 5.53% | 0.13% | |||
| 44,338,703 | $4.1b | 3.8% | 0.24% | |||
| 35,218,290 | $3.3b | 0.98% | 0.62% | |||
| 20,540,059 | $1.9b | -6.35% | 0.51% | |||
| 13,860,921 | $1.3b | 3.87% | 0.17% | |||
| 10,086,085 | $938.2m | -4.62% | 0.07% | |||
| 8,948,655 | $832.4m | -20.73% | 0.37% | |||
| 8,481,666 | $789.0m | 0.35% | 0.17% | |||
| 7,767,349 | $722.5m | 1.37% | 0.23% | |||
| 7,566,436 | $703.8m | 541.83% | 0.09% | |||
| 7,278,344 | $677.0m | -0.71% | 0.19% | |||
| 6,337,271 | $589.5m | 8.23% | 0.14% | |||
| 5,842,444 | $543.5m | 15.04% | 0.11% | |||
| 5,649,188 | $525.5m | -2.13% | 0.51% | |||
| 4,989,689 | $464.1m | 13.4% | 0.05% | |||
| 4,364,403 | $406.0m | 3.51% | 0.16% | |||
| 4,350,150 | $404.7m | 0.01% | 0.08% | |||
| 3,960,600 | $368.4m | 3.01% | 0.31% | |||
| 3,791,277 | $352.7m | -0.21% | 0.1% | |||
| 3,714,253 | $345.5m | 18.49% | 0.28% | |||
| 3,601,682 | $335.0m | 4.93% | 0.29% | |||
| 3,535,236 | $328.8m | 1.66% | 0.39% | |||
| 3,337,300 | $310.4m | 0.15% | 0.21% | |||
| 3,217,260 | $299.3m | 4.76% | 0.95% |
Company Information
Duke Energy Corporation's employee growth, exchange listings and data sources
Key Information
- Name: Duke Energy Corporation
- Ticker: DUK
- Exchange: NYSE
- Founded: 1904
- Industry: Electric Utilities
- Sector: Utilities
- Implied Market Cap: US$71.622b
- Shares outstanding: 769.97m
- Website: https://www.duke-energy.com
Number of Employees
Location
- Duke Energy Corporation
- 526 South Church Street
- Charlotte
- North Carolina
- 28202-1803
- United States
Listings
| Ticker | Exchange | Primary Security | Security Type | Country | Currency | Listed on |
|---|---|---|---|---|---|---|
| DUK | NYSE (New York Stock Exchange) | Yes | Common Stock | US | USD | Jan 1968 |
| D2MN | DB (Deutsche Boerse AG) | Yes | Common Stock | DE | EUR | Jan 1968 |
| 0ID1 | LSE (London Stock Exchange) | Yes | Common Stock | GB | USD | Jan 1968 |
| DUKE | WBAG (Wiener Boerse AG) | Yes | Common Stock | AT | EUR | Jan 1968 |
| DUK * | BMV (Bolsa Mexicana de Valores) | Yes | Common Stock | MX | MXN | Jan 1968 |
| DUKB34 | BOVESPA (Bolsa de Valores de Sao Paulo) | BDR EACH REPR 1 COM USD0.001 | BR | BRL | Oct 2016 | |
| DUK.PRA | NYSE (New York Stock Exchange) | DP REP PFD A | US | USD | Mar 2019 | |
| A2R7SR | DB (Deutsche Boerse AG) | 4.875%-FRN SUB PERP USD 'B' | DE | USD | Sep 2019 |
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/10/02 00:00 |
| End of Day Share Price | 2022/09/30 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2021/12/31 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.