Growth Squeeze Taints Prospects at Duke

Duke DUK faces a long journey back to nobility.

Once a blue-chip company known for its reliable profits and dividends, Duke has regained some measure of stability since crowning Paul Anderson as its turnaround CEO. Most notably, the North Carolina energy giant has managed to keep its rich dividends intact while shedding billions of dollars worth of assets to pay down debt. But the company isn't exactly strolling on red carpet anymore.

After getting the royal treatment for months, Duke has seen its stock falter as investors fumble for new reasons to celebrate. By now, Duke has already sold its most troubled assets -- at a huge loss -- in an effort to reduce the risk profile of the entire company. But Anderson has promised investors more than "a sleepy utility" in the end.

Indeed, he actually suggested last month in announcing an earnings miss that Duke could soon begin to "selectively pursue growth opportunities." But one fixed-income analyst quickly sounded an alarm.

"The idea that Duke is considering growth, before undertaking the full 2004 as a year to solidify [as much as possible] the balance sheet, is not a particularly positive development in our opinion," wrote Deutsche Bank analyst Robert Rubin. "Any move toward growth with the current cash build will lead us to an immediate downgrade."

Indeed, Duke has found itself in a peculiar position. It is far more leveraged -- and therefore riskier -- than the safe utilities that once appealed to income-minded investors. Yet it faces serious backlash from credit analysts if it tries to become a growth company again.

Duke's stock, down 45 cents Monday to $19.35, has fallen 14% since it set a 52-week high early last month.

Score Card

In recent weeks, Duke has delivered some big -- but not necessarily good -- news to investors.