On Monday, BofA Securities adjusted its stance on Duke Energy (NYSE: NYSE:DUK), moving the stock from a Buy rating to Neutral and reducing the price target to $96 from $105.
"We downgrade shares of...after strong +10% relative outperformance since June 30th, and a net disappointing 4Q23 financial update," said analysts at BofA.
The utility firm's latest earnings report on February 8th revealed a decrease in near-term rate base and an increase in equity, leading to an approximate 3% underperformance in the stock's value.
The downgrade reflects a revised outlook for Duke Energy's earnings per share (EPS) for the years ahead. BofA Securities anticipates a negative impact on the company's EPS for 2025 and beyond, projecting a $0.15 (2-3%) decrease. The analyst's report further breaks down the FY26 EPS estimate to include a $0.17 reduction, attributing $0.06 to an $800 million average rate base reduction and $0.11 to a $1,250 million average equity dilution. However, higher earned returns and lower debt are expected to serve as significant counterbalances.
In light of the recent earnings update and the recalibrated financial projections, BofA Securities has also revised its EPS estimates for Duke Energy. The firm has lowered its EPS forecast by approximately $0.05 for 2024 and by more than $0.10 for 2025 and the years following. These adjustments take into account the updated rate base and capital expenditure figures, as well as the revised equity calculations presented in the full analyst report.
InvestingPro Insights
As investors digest the latest analyst revisions and Duke Energy's (NYSE: DUK) financial performance, InvestingPro data offers additional insights into the company's standing. According to real-time metrics, Duke Energy has a market capitalization of $70.69 billion and trades at a price-to-earnings (P/E) ratio of 17.05, reflecting investor valuation of its earnings capacity. The company's adjusted P/E ratio for the last twelve months as of Q4 2023 stands at 16.7, with a price-to-book ratio during the same period at 1.5. This suggests that the stock is trading at a relatively moderate valuation in terms of its assets and earnings.
InvestingPro Tips highlight that Duke Energy operates with a significant debt burden and short-term obligations that exceed its liquid assets. Yet, it remains a prominent player in the Electric Utilities industry and has maintained dividend payments for 54 consecutive years, with a current dividend yield of 4.47%. The company's commitment to shareholder returns is further evidenced by its track record of raising its dividend for 16 consecutive years. Furthermore, 5 analysts have revised their earnings upwards for the upcoming period, indicating potential optimism about the company's future performance.
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