Total Potential Return For Duke Energy Not Exciting Enough For These Analysts

The North Carolina Utilities Commission (NCUC) approved the acquisition of Piedmont Natural Gas Company, Inc. PNY by Duke Energy Corp DUK on September 29.

Argus’ Gary Hovis maintained a Hold rating on Duke Energy.

Hovis mentioned that the NCUC decision was the final regulatory approval required for the transaction to close.

Unexciting Potential Return

However, the analyst stated that despite Duke Energy’s robust fundamentals, “including a favorable regulatory environment and an expanding rate base, we see an unexciting total return potential for DUK over the next 12 months.”

Hovis expects the earnings at the company’s International segment to remain challenged until early 2017, driven by tough hydroelectric conditions in Brazil and unfavorable FX.

Positives

On the other hand, the analyst also pointed out, “We expect above-average rate base growth over the next several years and view the company’s recent sale of nonregulated generating assets in the Midwest as a strong positive.”

The other positive fundamentals, according to the Argus report, are Duke Energy’s improving balance sheet and well managed nuclear generating assets.

“The expected rise in Duke’s construction spending for new power plants, infrastructure improvements and alternative energy projects should have little, if any, impact on long-term earnings growth,” the analyst went on to say.

The company is now benefiting from the favorable changes in its regulated electric utility rate structures, as well as from the improving economy in Florida and Caroline, and moderate growth in kilowatt-hour sales.