Duke Energy CorporationDUK

Morningstar Rating

Stock Research and Analysis

by Ryan McLean

We think Duke Energy would make an attractive holding for investors who are seeking stable earnings, solid dividends, and geographic diversification.

Duke manages its businesses as a portfolio, selectively acquiring and selling assets to maximize returns. Read more

Bulls Say

Spinning off most of Duke's natural gas assets under Spectra should result in greater earnings transparency and free up access to capital at Duke.

Management expects the merger with Cinergy to create up to $450 million in annualized savings.

Duke says it must increase electricity generation capacity by 6,000 megawatts during the next five years to meet projected demand, creating an opportunity for rate-base expansion.

Duke's international operations are poised to capture growth in South America's developing energy markets. Read more

Bears Say

If Duke's Midwest DENA assets cannot be rolled into Cinergy's rate base, and instead must carry on weathering spot market conditions, earnings could suffer.

Given long-term underlying demand growth of only 1.5%-2%, much of Duke's earnings growth depends on regulatory approval for rate base expansion.

Regulatory uncertainty exists in Ohio. An extension of current rate terms in that state is not guaranteed.

Tight credit markets are a threat to growth at capital-intensive firms such as Duke. Read more

Strategy

Duke views its various business lines as a portfolio of energy assets to be actively managed. This strategy is evidenced by the company's 2007 spin-off of its natural gas storage and transmission assets. Read more

Management

Jim Rogers, who was CEO and chairman of Cinergy before its merger with Duke, became president and CEO of Duke Energy in 2006. He replaced Paul Anderson, who was brought on as CEO in 2003 to lead the firm's turnaround. Fred Fowler serves as president Read more

Profile

Duke delivers electricity and natural gas to some 4.4 million customers in the Carolinas and nearby states. The company also owns generation assets in Latin America. Duke Read more

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