Wed May 7, 2014
Duke Stock Up After 1st Quarter Earnings Loss
Duke Energy reported a nearly $100 million loss in the first quarter of this year—and its stock went up.
The loss comes from Duke selling its Midwest business—13 coal and natural gas plants—where it has less control over the price of electricity. The company estimates a $1.4 billion hit to its books. Other than the one-time loss, the company reported strong growth, partially due to a rebounding economy.
“It feels like the economic recovery is broadening and deepening a bit, and giving into the pockets of smaller businesses and middle income residences,” says Steve Young, Duke’s chief financial officer.
Young says as credit loosens, the unemployment rate drops, and income increases, people are using more energy. The cold, snowy winter also caused higher consumption. Add to that recent rate hikes, and Duke utilities earned an extra $80 million this quarter, or 11 cents per share.
Without the one-time loss, the company earned $1.17 a share—about 5 cents higher than analysts expected.
Goldman Sachs analyst Michael Lapides congratulated Young and Duke CEO Lynn Good on the earnings call.
Duke’s stock jumped nearly 50 cents a share after the earnings announcement to about $73.50, and closed a full percent above the previous day, at 73.82. That's despite both the loss and the company’s current, high-profile troubles with coal ash.
Duke spent $15 million this quarter plugging a spill of coal ash and cleaning it from the Dan River. If lawmakers or the courts force Duke to remove the ash from its other storage ponds around the state, Duke projects it could cost up to $10 billion. Even at that price, CEO Lynn Good told investors, it wouldn’t materially impact the company, nor would it spur a rate shock.
“Those numbers are over 20-30 years. It will just take that long to physically accomplish,” she says.
The company expects to spend $5 or $6 billion to comply with new regulations on coal ash and other new, water, air, and carbon emissions over the next decade.