Duke Energy Corp. – Value Analysis (NYSE:DUK) : May 5, 2017

Capitalcube gives Duke Energy Corp. a score of 19.

Our analysis is based on comparing Duke Energy Corp. with the following peers – Xcel Energy Inc., Southern Company, SCANA Corporation, American Electric Power Company, Inc., Dominion Resources, Inc., PPL Corporation, FirstEnergy Corp., PG&E Corporation, Ameren Corporation and NextEra Energy, Inc. (XEL-US, SO-US, SCG-US, AEP-US, D-US, PPL-US, FE-US, PCG-US, AEE-US and NEE-US).

Investment Outlook

Duke Energy Corp. has a fundamental score of 19 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It trades at a lower Price/Book multiple (1.41) than its peer median (1.89).
  • The market expects DUK-US‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • DUK-US employs relatively high amounts of assets while generating relatively median profit margins.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • DUK-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While DUK-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • DUK-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

DUK-US is debt-constrained.

  • With debt at a relatively high 48.29% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 41.27%), and interest coverage level of 3.20x, DUK-US seems debt-constrained.
  • All 10 peers for the company have an outstanding debt balance.

DUK-US has maintained its Some Capacity profile from the prior year-end.

  • DUK-US‘s interest coverage is similar to last year’s high of 3.42x, which compares to the 2014 low of 3.13x.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (3.20x) and the peer median (3.46x).
  • DUK-US‘s debt-EV continues to trend upward and is above (but within one standard deviation of) its four-year average debt-EV of 46.19%.
  • While its debt-EV increased to 48.29% from 47.21% (in 2015), its peer median decreased during this period to 41.27% from 42.59%.
  • Relative to peers, debt-EV rose 2.39 percentage points.

Access the detailed analysis for Duke Energy Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Xcel Energy Inc. 40.12 0.71 3.39 21.84
Southern Company 49.27 0.75 3.86 10.27
SCANA Corporation 42 0.73 3.2 17.72
American Electric Power Company, Inc. 38.99 0.46 3.62 21.22
Dominion Resources, Inc. 41.27 0.52 3.17 14.41
PPL Corporation 45.84 0.52 3.46 17.69
FirstEnergy Corp. 62.03 0.36 1.91 14.17
PG&E Corporation 34.98 0.91 3.88 35.06
Ameren Corporation 37.98 0.52 3.67 24.91
NextEra Energy, Inc. 36.16 0.6 3.68 19.59
Duke Energy Corporation 48.29 0.7 3.2 14.54
Peer Median 41.27 0.6 3.46 17.72
Best In Class 34.98 0.91 3.88 35.06

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Company Profile

Duke Energy Corp. engages in electric power and gas distribution operations, and provides other energy related services. It operates its business through the following segments: Regulated Utilities, International Energy, and Commercial Portfolio. The Regulated Utilities segment conducts electric and gas operations primarily through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana, and the regulated transmission and distribution operations of Duke Energy Ohio. The International Energy segment principally operates and manages power generation facilities and engages in the sales and marketing of electric power, natural gas, and natural gas liquids outside the U.S. The Commercial Posrtfolio segment owns, operates and manages power plants and engages in the wholesale marketing and procurement of electric power, fuel and emission allowances related to these plants as well as other contractual positions. The company was founded on April 3, 2006 and is headquartered in Charlotte, NC.

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