Duke Energy CorporationDUK

Morningstar Rating

Stock Research and Analysis

by Andrew Bischof

Duke is the largest regulated utility in the United States, following its merger with Progress Energy. The company now must focus on achieving its targeted 5%-7% cost synergies, which we view as attainable. However, delivering the promised $600 million-$800 Read more

Bulls Say

Duke's regulated utilities provide a relatively stable source of earnings. Its large capital-expenditure plan should drive rate base and earnings growth for the next several years.

Duke operates in constructive North Carolina and South Carolina regulatory jurisdictions, which account for more than half of the company's regulated revenue.

Duke's international businesses are highly contracted with strong cash generation and earnings diversity.

An attractive 4.2% dividend yield should provide some downside protection for shareholders.

Management is proactively addressing environmental risks through its investment in cleaner generation technology and the retirement of older units. Read more

Bears Say

Management faces several challenges to integrating Progress Energy's operations, mainly meeting promised fuel savings to Carolina customers and increased risk from souring Florida regulatory relationships.

Because of its investment plan, Duke will have to request rate cases more often, increasing regulatory risk.

Rising interest rates could unearth more attractive income-producing alternatives for yield-seeking investors.

Its commercial and international portfolios expose the company to commodity and currency risks, creating uncertainty surrounding the long-term earnings power of these assets. Read more

Management

We believe the board of directors has been a poor steward of capital, particularly given its abrupt decision to remove Bill Johnson, former Progress CEO and chairman, as CEO of the combined company hours after closing the deal. Jim Rogers, who planned Read more

Profile

Duke Energy is the largest U.S. utility with regulated utilities in the Carolinas, Indiana, Florida, Ohio, and Kentucky that deliver electricity and gas to about 7.1 million Read more