The Right Energy Company to Invest In

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U.S.-based energy company Duke Energy (NYSE: DUK) reported its earnings on Thursday, Nov. 8. The company has reported tremendous growth in both earnings and revenue resulting from the merger with Raleigh-based Progress Energy and growth in customer numbers.

Facts & Figures

Duke Energy's latest numbers are very good, with the company’s earnings and revenues both have exceeded analyst’s estimates. In it's third quarter Duke posted net income of $594 million, up from $472 million a year earlier. Earnings per share fell to $0.85 from $1.06 as shares outstanding increased by 57%, due to the deal with Progress. Excluding one-time items and other charges to integrate Progress, the company earned $1.47 per share. Revenues have climbed 67% to $6.72 billion from $4.01 billion from the same period last year.

The combined (Duke and Progress Energy) company’s great start is clearly reflected in the company’s financials. The synergies generated from the merger have led to savings for customers and investors. The fleet modernization program of the company has realized benefits, despite unfavorable weather. The company is nearing the end of its $9 billion fleet modernization program, which will increase the efficiency and fuel diversity of their generation, helping them comply with stricter environmental laws.

Many of Duke’s new projects, like Cliffside Unit 6, are undergoing intensive testing and commissioning processes and are expected to be commercially available by the end of the year. The company’s combined cycle natural gas projects in the Carolinas, Dan River, Lee, and Sutton are on schedule to start by year end. The company has also added more renewable source of energy in its portfolio and expects a total generation of 2000 MW of renewable energy by the end of this year.

Looking Around

American Electric Power Company (NYSE: AEP) had reported its third quarter earnings on Oct. 24, with revenues and earnings almost in line with analyst’s consensus. The negative impact in earnings is mainly because drought and low-water conditions have hampered its river transport business in Ohio. The company expects growth through transmission network expansion, cost control measures, and electricity generation through its first ultra-supercritical coal plant of the country, Turk Plant. The languid state of economy in many of the states where AEP provides services will restrict its growth opportunities. This public utility company will need time and changes to get on track; until then I would not suggest investing in American Electric Power Company.

Center Point Energy (NYSE: CNP) reported its net income for the quarter at $10 million, or $0.02 per diluted share. The earnings of $10 million includes in a $252 million non-cash goodwill impairment charge associated with company’s competitive Energy Services business, and a $136 million non-cash pre-tax gain associated with the purchase of the remaining interest in its joint venture Waskom. The company, apart from the above adjustments, has delivered strong performance and its regulated electric and gas distribution utilities have performed well despite low natural gas prices. The analysis of numbers makes it easier to decide on the company’s dwindling performance, as revenues and earnings have fallen significantly. Although management is very positive about company prospects, going with the current numbers I will not expose my portfolio to Center Point Energy.

Final Words

Outland Energy Services, which maintains and monitors wind turbines, has been bought by Duke Energy, further adding value to company’s renewable source of energy. Duke Energy has a strong balance sheet and a good liquidity position, which will help the company to grow its business as well as dividends. The company’s financial strength should help it to grow in a cost-effective manner, thereby directly benefiting its customers and investors. The growth in the last quarter was phenomenal, though the same results might not be delivered in the coming quarters; however, the company looks very good with a long-term investment horizon.


tarunbachhawat has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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