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Analyst: Duke Energy earnings ‘fine’

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Despite reporting its diluted earnings per share slightly lower year-over-year, Duke Energy, parent to Upstate-serving Duke Energy Carolinas, said it was on track to achieve its yearly financial goals.

In a press release the company, which is one of the largest in the nation and based in Charlotte, N.C., said its reported diluted earnings per share was 74 cents – a $0.04 decline from the same quarter a year ago. A reason for the decline was “an impairment in Central America” and “costs to achieve mergers and cost savings initiatives.”

In its regulated utilities division, Duke Energy reported segment income of $718 million for the second quarter of 2016 compared to $632 million in the same quarter a year ago. The increase in income was set off by lower operational expenses, increased wholesale margins and higher pricing and riders.

The quarter contributed to a segment income of $1.413 billion for the first six months of the year, compared to $1.406 billion reported in the first six months of 2015. Based on those figures, Duke Energy said it was on track to hit its annual adjusted diluted earnings range of $4.50 to $4.70 per share.

"Our solid second quarter performance reflects the strength of our regulated utilities driven by strategic investments, dedicated cost management and a relentless focus on operational excellence," said Lynn Good, Duke Energy chairman, president and CEO, in the release.

Andy Smith, senior analyst with Edward Jones, based in St. Louis, said the company’s reported earnings, including the drop in adjusted diluted earnings per share, was nothing to be concerned about considering the company’s decision to divest itself from its International Energy segment – which reported an $11 million decrease in adjusted income for the second quarter – and the finalization of Duke Energy’s acquisition of Charlotte-based Piedmont Natural Gas which is expected at the end of 2016.

“I think, overall, it was fine,” Smith said, in an interview with GSA Business Report. “People are really looking ahead to next year when the sale of the international side is complete and the merger with Piedmont is also done.

“We are expecting them to get about $2 billion for those international holdings, which are actually very good assets. They are still doing the wise thing of selling because investors still want to see a cleaner store without the volatility those international holdings can bring.”

He said the nearly $5 billion merger with Piedmont will put Duke in the middle of pipelines and natural gas infrastructure.

“Piedmont’s growth rate is a little higher than Duke’s and debt is so cheap,” Smith said. “It is a good investment for Duke even though they might have paid a little extra for it.”

Duke Energy recently abandoned its highly-criticized plans to modernize its Western Carolinas grid by spending up to $1 billion to construct a new natural gas plant in Asheville and expand transmission lines from that plant to a new substation in Campobello. After receiving community input and pushing its deadline to make a decision, the company elected to halt the modernization plans.

“If you are a utility company, you want to see them undertake more projects because those are things that help make money,” Smith said. “Not doing it is not going to kill them, but you would rather see them spend more to make more.”

Reach Matthew Clark at 864-720-1222.

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