Can Duke Energy Balance Lower Usage with Customer Growth in 4Q15?

Duke Energy: Can It Ride Gains in 2016 through 4Q15 Results?

(Continued from Prior Part)

Duke’s revenues

According to analyst estimates, Duke Energy Corporation (DUK) is expected to report revenues of $5.9 billion for 4Q15. In the same quarter one year previously, Duke reported revenues of $5.2 billion. The company is actively increasing its customer base growth at an annualized rate of 1.3%, which should partially offset the lower usage of electricity per customer stemming from the mild weather during the quarter.

Regulated utilities

Duke Energy’s regulated business consistently grew in the first three quarters of 2015. It contributed nearly 90% of total revenues. The company’s strong customer base growth is expected to continue in 4Q15, which may positively impact earnings.

The largest US power company by capacity, Duke Energy’s regulated generation segment continued its strong performance in the first three quarters of 2015. Its nuclear fleet achieved a 97% capacity factor while its natural gas-fired power plants benefitted from low natural gas prices. But Duke burned more natural gas in first nine months of 2015 than it did in either 2013 and 2014, so the lower price of natural gas may have benefited the company in 4Q15 as well.

Heavy rain and flooding

Duke’s nearly 500,000 customers faced outages in October 2015 due to heavy rains and flooding in the Carolinas. This may have a slightly negative impact on the company’s revenues in 4Q15. But Duke is aggressively trying to develop its portfolio of residential customers as its residential customer segment has a higher profit margin than its commercial and industrial segments.

Still, sales from this category are highly dependent on weather conditions. By comparison, FirstEnergy Corporation (FE) reduced its residential customers by 38% over the last four quarters.

Duke International Energy

Duke’s international segment is expected to contribute earnings of $0.30 per share in 2015. But in 2014, it earned $0.61 per share. This massive dip in earnings stems from the stronger dollar and the struggling Latin American economy. Like Duke Energy, Sempra Energy (SRE) and PPL Corporation (PPL) are utilities (VPU) that operate offshore assets.

Continue to the next part for a look at Duke Energy’s 4Q15 dividend payout ratio.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Duke Energy’s International Operations and 4Q15 Earnings

• Part 3 - What Is Duke Energy Anticipating from Its Dividend Payout Ratio?

• Part 4 - Duke Energy Recovers on Dovish Stance from the Fed