Recent earnings and guidance
Duke Energy (DUK) reported a jump of 27.6% year-over-year (or YoY) growth in earnings per share (or EPS) in its 2Q14 results. Favorable weather and a lower effective tax rate strengthened the regulated utilities business. The tax benefits from the company’s operation in Chile helped the international energy segment. This resulted in Duke’s strong earnings growth. Duke Energy also increased its full year earnings guidance to $4.50–$4.65 per share from its previous forecast of $4.45–$4.60 per share.
Historical revenue and EBITDA
Duke Energy’s revenues have grown over the last five years. It maintained a healthy earnings before interest, taxes, depreciation and amortization (or EBITDA) margin. This growth was mainly driven by Duke’s merger with Progress Energy in 2012. Before the merger, Progress’ revenues were $9 billion. The company’s portfolio of regulated business provides a stable EBITDA margin. It’s stable compared to unregulated operators like NRG Energy (NRG) and Calpine Corporation (CPN).
Duke earns ~$25 billion in revenue. In the power industry, it’s second only to Exelon Corporation (EXC). However, Duke’s revenue is at a much better EBITDA margin than Exelon’s revenue.
Last year, the company had EBITDA margins of 35%. The main part of Duke’s operation lies in the regulated utilities space. In this space, pricing is based on a markup to the cost of production for utilities. This ensures the company’s similar EBITDA margins. In the last five years, the EBITDA margin has been in the range of 32%–36%.
Duke Energy has the highest weighting in the Utilities Select Sector SPDR (XLU).
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