Duke Energy Seems Attractive despite Ordinary Price Targets



Is Duke Energy poised for growth?

Earnings of Duke Energy (DUK) are expected to further stabilize with its growing regulated rate base. It already owns stakes in regulated pipelines like Atlantic Coast and Sabal Trail. Duke’s earnings growth from the slower electric business can be accentuated with its growing natural gas operations. The acquisition of Piedmont Natural Gas (PNY) is expected to ultimately provide gas with better access to Duke Energy.

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Quitting the Latin American (ILF) Generation business would not only peel away its weaker Merchant Power segment, but its sales proceedings should further fortify its Regulated segment. Additionally, Duke’s management is confident over this sale at a reasonable valuation. However, Duke’s 25% stake in Saudi Arabia’s National Methanol Company is to remain untouched.

Duke Energy is one of the better-yielding utilities in the sector with stronger income growth and relatively lower risk.

Price targets

According to Wall Street analysts’ estimates, Duke Energy (DUK) has a price target of $79.60 against its current market price of $77.00. This implies an estimated upside of 3.4% in one year.

Of the 23 analysts tracking Duke Energy, five analysts have given it a “buy” recommendation, and 18 analysts have given it a “hold” recommendation. One analyst gave it a “sell” recommendation as of April 27, 2016.

By comparison, utility peer Southern Company (SO) has target prices that are 1% lower than its current price. Dominion Resources (D) has a target price of $77, which represents a rise of ~7% compared to its current price of $73.


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