Why Duke Energy Underperformed the Utility Sector



Duke Energy has fallen YTD

Duke Energy (DUK) has fallen 4.1% YTD (year-to-date). However, the Utilities Select Sector SPDR ETF (XLU) has risen 1.2% YTD. The S&P 500 Index and the S&P Mid-Cap 400 Index, the broader market indexes, have risen 9.6% and 7.6% YTD, respectively. Utility stocks constitute 2.8% and 4.5% of these equity indexes, respectively.

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Why Duke Energy underperformed the utility sector

In mid-June, the utility sector made a sharp correction. On June 11, DUK closed at $72.12, its lowest YTD closing. That same day, XLU fell 4.7% month-to-date, the only decline among SPDR ETFs that break the broader market into subsectors.

From June 11 to August 1, DUK recovered 12.4% compared to 7.9% for XLU. However, on August 2, DUK reported its second-quarter earnings. Its adjusted EPS was $0.93, which is $0.09 lower than analysts’ consensus estimate since higher operating costs offset the effect of a lower tax rate. Between August 2 and September 20, DUK rose only 0.2%, while XLU rose 1.1%.

Moving averages

On September 19, DUK decisively broke below its 50-day moving average for the first time since June 21 when it crossed above that key level. On September 20, DUK was 1.1% and 0.7% below its 20-day and 50-day moving averages, respectively. Going forward, its 100-day and 200-day moving averages, both at ~$79 levels, could be an important support zone for DUK.

On September 20, DUK announced that it has brought back online ~1.7 million power outages in North and South Carolina in the aftermath of Hurricane Florence.


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