The consensus price target for Duke Energy (DUK) for the next year is $80.88, which implies an upside of 9.5% from its current market price of $73.88. Of the 21 analysts tracking Duke, 16 now recommend it as a “hold,” while three recommend a “buy.” Two analysts recommend Duke as a “sell” as of November 22, 2016.
Duke’s management is targeting 4%–6% long-term earnings growth, which is in line with the industry average. Its exit from the Latin American merchant business and its expanded natural gas distribution operations may bode well for the company’s earnings growth in the meantime.
By comparison, Southern Company (SO) has a median price target of $51.31, which accounts for an estimated upside of 8% from its current market price of $47.60.
American Electric Power Company (AEP) has a median price target of $67, which accounts for an estimated upside of 13.3% from its current market price of $59.17.
As we anticipate the Federal Reserve meeting next month, utility stocks may see increased weakness and volatility. Remember, higher interest rates can be detrimental to utilities. But according to current economic data, the chance of any substantial rate hike in the near future looks to be slim to none.
Donald Trump’s win in the 2016 US Presidential election, meanwhile, has brought with it more uncertainty, resulting in a sell-off of utilities. Duke Energy has been actively investing in renewable energy sources and low-emitting power generation capacities in the last few years. The uncertain future of the Clean Power Plan—which Trump opposes—also raises questions over the billions of dollars these utilities have spent to be in compliance with the plan.