Duke Energy (DUK) stock fell more than 10% from its 52-week high last month after lower-than-expected third-quarter revenues and share dilution. Also, project delay at its Atlantic Coast Pipeline hampered the stock recently. Importantly, the stock looks attractive after a recent fall from the valuation standpoint. Interestingly, there was a flurry of brokerages raising target prices of Duke Energy stock recently.
Duke Energy stock: Brokerages positive?
Barclays raised Duke Energy’s rating from equal weight to overweight on November 21. It cut DUK’s target price from $99 to $98. Also, Goldman Sachs upgraded it from sell to buy and rose the target price from $88 to $93. Mizuho Securities started coverage on DUK with a neutral rating and a target price of $90 on November 21. Also, SunTrust Robinson Humphrey raised its target price from $90 to $92 last week.
The second-biggest utility by market capitalization, Duke Energy stock has significantly underperformed peers this year. It is up just a percent this year compared to the utility sector’s 18% run so far this year.
Currently, Duke Energy stock is trading 17x its 2020 earnings, which is trading at a notable discount. Its five-year average PE is trading at around 19x. Also, utilities at-large are trading at 19x their forward earnings. Duke Energy’s peers NextEra Energy (NEE) and Southern Company (SO) are trading 24 times and 19 times their forward earnings, respectively.
Duke Energy Q3 earnings
The utility beat analysts’ earnings estimates in the third quarter. It reported an EPS of $1.79 per share. This was 8% higher than Q3 2018. Its revenues came in at $6.94 billion during the third quarter, an increase of 4.7% YoY. For 2019, Duke Energy is expected to report a net income of $3.62 billion, which represents about a 9% growth YoY.
Duke Energy closed its 25 million equity offering price at $86.45 on November 21. The proceeds from the offering are expected to be used for general corporate purposes. Project delay at DUK’s Atlantic Coast Pipeline bothered investors recently. Duke jointly owns the natural gas pipeline project with Dominion Energy and Southern Company. The project is expected to cost $7.8 billion, up from $5.1 billion from its original estimate. It will likely be in service in the first half of 2022.
The utility currently offers a stable yield of 4.4%, higher than the industry average. Duke Energy paid a quarterly cash dividend for the last 93 straight years. The long dividend payment history indicates stability and reliability. In comparison, broader utilities on average yield 3%. In the last five years, Duke Energy raised its dividends by 3.5% compounded annually. This is marginally lower than the industry average close to 4%.
Generally, utilities pay large portions of their profits to shareholders in the form of dividends. That is why they have a relatively higher dividend yield. NextEra Energy and Southern Company yield around 2.3% and 4%, respectively. Read Top Dividend Stocks from Utilities to Combat Recession to learn more.
Analysts recommend “hold” for Duke Energy
Duke Energy stock currently offers a potential upside of about 11% for the next 12 months. Wall Street analysts gave it a mean target price of $96.4 against its current market price of $87.14. These analysts largely look cautious on the DUK stock. Among the total 17 analysts covering Duke, ten recommended as a “hold,” one recommended a “strong buy,” five recommended a “buy,” and one recommended a “sell.”
Utility stocks kept their uptrend and largely tracked the Dow Jones Index this year. Read why utilities might continue to trade strong ahead in Utilities Look Strong amid Growing Recession Fears.