Company Review Thursday

Company Review Thursday: Duke Energy

Some of you may not know this, but the Utilities sector is probably one of the most regulated sectors in the US Markets. The Federal Energy Regulatory Commission (FERC) is responsible for regulating the wholesale movements of oil, natural gas, and electricity across state lines as well as making sure mergers do not breach any anti-trust laws (basically no monopolies). One of their biggest tasks to date has been keeping up with the largest electric utility provider in the United States, Duke Energy. Over the past 10  years, Duke Energy has merged with Cinergy Corporation (2006), Progress Energy (2012), and Piedmont Natural Gas (completing in August of 2016) to service 7 million customers across North Carolina, South Carolina, Ohio, Indiana, Florida and Kentucky. Duke Energy has consistently kept itself at the top of the industry and interestingly, the mergers haven’t been the only reason why.

Company Snapshot Yahoo! Finance Data)
Name:  Duke Energy Corporation
Ticker: DUK
Current Price: $79.69 (as of 3/24/2016  @ 3:07pm)
52 Week High Price:$80.40
52 Week Low Price: $65.50
Market Capitalization: $54.88B (Large Capital)
Price/Earnings (P/E Ratio): 19.67
Earnings/Share (EPS): $4.05
Dividend: $3.30/year (4.15% yield)
Industry: Utilities
Primary Business: Electric Utilities

The Good, The Bad and The Ugly

One of the most impressive things about Duke Energy is the fact they have crossed country lines and have power plants in Brazil,  Guatemala, El Salvador, Argentina, Chile and many other countries in Central and South America that supply about 12% of the company revenue. These power plants generate power using water (hydroelectric) or thermal power. This shows Duke Energy is heavily invested in creating clean energy and renewable energy. A new project out in California is also expanding the capabilities the Duke Energy has in spearheading all utilities in a more sustainable direction.

Needless to say I really appreciate the dividend that Duke Energy puts out. That percentage is brilliant!  But one other metric I haven’t really given much blog time is the current ratio, which takes the current assets and measures them against the current liabilities. The higher this metric the more able a company is to cover their short term debt with liquid assets like cash, accounts receivable and securities. Duke Energy’s current ration is currently under 1 (~0.73) so right now if Duke Energy had to pay off all its debts today, it wouldn’t be in a position to do so. But this is somewhat expected from a company that’s been heavily acquiring companies. By comparison to other utility companies, Duke seems to be around the industry average:

Company Name Current Ratio
Dominion Resources 0.51
Edison International 0.54
NextEra Energy 0.67
Duke Energy 0.73
Pacific Gas & Electric  0.92

Along with acquisitions, Duke has had a few PR spills (no pun intended) and been hit with some big fines in the last few months. Specifically, DUK was to blame for the coal ash spill in the Dan River back in 2015. After pleading guilty, the company has been hit with  $100+ million in fines for damage they caused and to help fund efforts to stabilize the area they damaged. This article goes in to a great bit of detail as to what happened, but just know Duke is still paying for what they’ve done by neglecting the care they take for their coal ash storage.

I already have a long position in Duke Energy, but I’m thinking with the few extra pennies I have from my tax return, I’ll want to buy at least 5 more shares.

*Nothing in this post is any type of advice. Just giving my perspective on this company*

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s