reported better-than-expected second-quarter results on better gas transmission earnings, but the company lowered its full-year forecast due to the prolonged economic downturn.
The company now expects to earn $2.45 to $2.55 a share for the year, at the low end to slightly below previous guidance. Analysts polled by Thomson Financial/First Call had been looking for $2.65. Duke said, "These lower expectations are primarily the result of reduced volatility, subdued commodity pricing and reduced energy demand."
For the second quarter, the company earned $474 million, or 57 cents a share, compared with $419 million, or 54 cents a share, in the year-ago quarter. According to tracking firm Thomson Financial/First Call, analysts had been expecting 51 cents.
The company said its Energy Services business' earnings before interest and taxes rose to $335 million from $328 million last year, while Duke Energy North America reported an EBIT decrease to $196 million from $272 million. The North America unit includes the volatile energy trading business, which has been suffering from lower commodity prices and a cut in energy demand.
Also, Duke has found itself in the middle of the industrywide round-trip trading scandals, with the company admitting to about two dozen trades. The company said it was preparing its response to the
Securities and Exchange Commission's
request for information, but it has concluded its own investigation, finding "the need to strengthen some aspects of its trading operations." Duke said it was "taking appropriate management actions."
The company also reduced its capital expenditures for the year, estimating about $6.8 billion. For 2003 and 2004, Duke sees capex at about $4 billion to $6 billion. The reduction will ultimately hurt the utility company's future growth prospects.
In addition to the lowered 2002 guidance, Duke also said it expects earnings to grow about 5% to 10% in 2003, with lower results for Duke Power. Regarding its energy trading business, Duke said, "Although energy trading has been under severe pressure, the trading and marketing business is an integral part of Duke Energy's ongoing strategy of maximizing returns on our asset positions while providing valuable risk management services to our energy customers."
Shares of Duke closed at $19.30 before the news.