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Duke Energy Corp (DUK) Earnings: Is Its Dividend Worth It?

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Duke Energy Corp (NYSE:DUK) reported earnings on Tuesday, beating quarterly earnings estimates for the eighth consecutive quarter. But dollars don’t always tell the whole story, and Duke’s rough-and-tumble year could keep it in bear country for the foreseeable future. Today I’ll look at what this utility’s been up to, see where it’s headed, and make my call on Duke’s 2013.

Duke Energy Corp (NYSE:DUK)Number crunching
On the top line, Duke pulled in $5.7 billion in sales for Q4 2012, 3.5% higher than Mr. Market had expected. The company managed to hang on to a sizable chunk of that change, recording adjusted diluted earnings per share of $0.70, a solid 9% above analyst estimates.

For 2012 overall, Duke missed top-line expectations of $20.1 billion in revenue by $500 million. But lackluster sales were a sectorwide trend, and expectations for recent mergers seem to have been set high. After merging with Constellation Energy in March, Exelon Corporation (NYSE:EXC) missed on sales by a whole 22 %.

The good news? Duke hit its mark on earnings per share. The utility recorded 2012 adjusted diluted EPS of $4.32, tipping the upper end of its $4.20-$4.35 guidance. Looking ahead, Duke’s remaining aloof and holding off on 2013 numbers until its Feb. 28 analyst meeting.

A position to transition
If you’re investing in Duke Energy today, it should be based on what the utility will look like tomorrow. The company underwent a major merger with Progress Energy in July, making it the largest utility in the U.S. in terms of assets. It serves more than 7 million customers across the Southeast and Midwest, putting it in a seemingly prime position for a plethora of profit. But there are two main issues: a botched merger and a coal-centric outdated energy portfolio. Let’s see how Duke’s doing.

After an 18-month approval process and two state investigations, Duke and its CEO, Jim Rogers, seem to finally be out of the hot seat. The North Carolina Utilities Commission settled its investigations, Rogers will step down at the end of 2013, and Duke will be in a much better place to maneuver for a $440 million rate increase. Speaking with the Charlotte Observer in January, Rogers reflected: “The birthing process of the creation of the largest utility in the country has been quite difficult. … I think the baby is going to be beautiful.”

The second issue, Duke’s coal-centric portfolio, is not so easily settled. Fortunately for the utility and its shareholders, Duke is making major strides to reorient its energy generation toward cleaner, more efficient, and/or cheaper sources.

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