Will Duke Energy (DUK) Miss this Earnings Season? - Analyst Blog

Duke Energy Corp. DUK is slated to report first-quarter 2014 results on May 7, 2014. Last quarter, the company delivered a positive 6.38% earnings surprise. Let's see how things are shaping up for the company prior to the announcement.

Factors to Consider this Past Quarter

Charlotte, NC based Duke Energy is the largest U.S. utility offering efficient power and energy services across various states in the U.S. and several other international locations.

In the first quarter 2014, the company's earnings will likely increase from the year-ago level, mainly because of the cold wave that hit the U.S. this winter. It is likely to have boosted demand for electricity.

Again, Duke Energy is focused on expanding its renewable portfolio given the aggressive pro-environment stance in the U.S. During the quarter, Duke Energy Renewables, a business unit of Duke Energy, entered into an agreement with an Australian renewable energy firm Infigen Energy under which it acquired two California solar projects from the latter. Once the projects are complete, it will double Duke Energy's solar power capacity in California.

Duke Energy Renewables also entered into an agreement with Swinerton Renewable Energy, wherein Swinerton Renewable will provide turnkey engineering, procurement, and construction services to the company's two solar power projects, Pumpjack and Wildwood, located near Bakersfield, CA.

Having said so, the company will record a pretax charge of $1 billion to $2 billion in the first quarter of 2014 from the sale of its stake in 13 power plants in the nation's Midwest after Ohio regulators denied its request to raise rates. The plants together have a capacity of 6,600 megawatts.

Earnings Whispers?

Our proven model does not conclusively show that Duke Energy is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, this is not the case here as elaborated below.

Negative Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. The Most Accurate estimate stands at $1.09 while the Zacks Consensus Estimate is higher at $1.10 resulting in an ESP of -0.91%.

Zacks Rank: Despite Duke Energy's Zacks Rank #3 (Hold), the negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While an earnings beat looks uncertain for Duke Energy, here are some energy companies to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Westar Energy, Inc. WR with Earnings ESP of +2.27% and a Zacks Rank #2 (Buy).

NRG Yield, Inc.  NYLD with Earnings ESP of +23.53% and a Zacks Rank #2.

Ameren Corp. AEE with earnings ESP of +6.25% and a Zacks Rank #3.