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Why Duke Energy (DUK) Stock Is Up Today

Stocks in this article: DUK

NEW YORK (TheStreet) -- Duke Energy (DUK) was gaining 1% to $73.95 Monday after announcing it will purchase generating assets from North Carolina's Eastern Municipal Power Agency.

The company will pay $1.2 billion for the generating assets. The power agency serves about 270,000 customers and owns partial interests in several Duke Energy plants throughout North Carolina which represent about 700 MW of its generating capacity.

Duke Energy will enter a 30-year wholesale power contract to continue service the plants' customers.

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TheStreet Ratings team rates DUKE ENERGY CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DUKE ENERGY CORP (DUK) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DUK's revenue growth has slightly outpaced the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 12.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,373.00 million or 25.84% when compared to the same quarter last year. In addition, DUKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 18.54%.
  • DUKE ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DUKE ENERGY CORP increased its bottom line by earning $3.73 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($4.57 versus $3.73).
  • The gross profit margin for DUKE ENERGY CORP is currently lower than what is desirable, coming in at 34.48%. Regardless of DUK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.46% trails the industry average.
  • In its most recent trading session, DUK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: DUK Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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