Duke Energy Surges Higher After Earnings Top Expectations

Shares in Duke Energy Corporation (DUK) powered nearly 3% higher Monday after the company disclosed better-than-expected quarterly earnings, and a report surfaced that an activist investor has a stake in the utilities giant.

The company posted a first-quarter (Q1) adjusted profit of $1.26 per share, surpassing analyst expectations of $1.24 a share. Moreover, the bottom line improved 10.5% on a year-over-year (YoY) basis, driven by growth in the company’s electric utilities business. Revenues of $6.15 billion grew 3.4% from a year earlier; however, the metric came in shy of the $6.21 billion figure Wall Street had expected. Looking ahead, management sees full-year earnings per share (EPS) of $5.00 to $5.30 with a long-term growth rate of 5% to 7%.

“We are positioned to deliver sustainable long-term value as we accelerate our clean energy transformation by investing in renewables, battery storage and in our delivery system,” CEO Lynn Good said in a statement, per PR Newswire.

Monday afternoon, the Wall Street Journal reported that activist investor Elliott Management Corp. has a stake in the company. However, the size of the position remains unclear. According to the Journal, people familiar with the matter said Elliott may persuade Duke to offload underperforming assets and implement operational improvements.

As of May 11, 2021, Duke Energy stock has a market capitalization of $79.8 billion, offers an enticing 3.83% dividend yield, and trades 26.85% higher over the past twelve months. Since the start of the year, the shares have added 13.30%, outperforming the energy sector by around 8% over the same period. From a valuation standpoint, the stock trades 14% above its five-year average earnings multiple of 17.5 times.

Wall Street View

Last month, Wells Fargo analyst Neil Kalton raised the bank’s price target on the stock to $104 from $97, citing higher peer group multiples. Kalton also reiterated his ‘Equal Weight’ recommendation.

Elsewhere, broker coverage remains mostly bullish. The shares receive 6 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 12 ‘Hold’ ratings. Twelve-month price targets range from a Street high $112 to a low of $96, with the average target sitting at $103.69. Look for additional broker upgrades in the months ahead as the push toward renewable energy gathers momentum.

Technical Outlook and Trading Tactics

Duke shares broke out from a pennant on above-average volume Monday, indicating further upside continuation. Furthermore, the moving average convergence divergence (MACD) indicator recently crossed back above its signal line to generate a buy signal.

Active traders who want to capitalize on short-term momentum should consider using a trailing bar stop to book profits. To utilize this exit strategy, remain in the trade until the price closes beneath the current day’s low, or the previous day’s low, depending on personal risk tolerance.

For a look at today’s earnings schedule, check out our earnings calendar.

3 Utilities Stocks Ready to Power Ahead

Utility stocks, known for their stable cash flow and high-paying dividends, have been out of favor over the past year as investors prioritized leading consumer cyclical and technology names that benefited from people spending more time at home during the pandemic.

However, the group may see renewed buying interest this year as the lure of predictable earnings and above-average yields in an unpredictable environment may draw in those looking for lower-risk investment options.

Below, we review three utilities stocks that appear ready to move higher in the months ahead.

Consolidated Edison, Inc.

With a market capitalization of $23.31 billion, Consolidated Edison, Inc. (ED) provides steam, natural gas, and electricity to customers on the U.S. East Coast. The utility also has a renewable energy segment generating gas and electric transmission. Edison has grown its dividend by an average of 3.5% each year for 45 consecutive years. The stock currently issues a 4.51% yield and has slipped 3.68% year to date (YTD).

Charts wise, the stock temporarily broke below crucial support at $69.50 but closed above that level Wednesday, increasing the possibility of a possible head-fake trade. Traders should look for a test of key resistance at $83.

Duke Energy Corporation

Duke Energy Corporation (DUK) provides regulated utility services to more than 7 million customers in the midwestern and southern USA. The 15-year-old energy giant, which trades flat on the year, operates through three divisions: gas utilities and infrastructure; and commercial renewables. Duke has increased its dividend for the past 14 consecutive years by an average of around 3%, currently offering investors a yield of 4.34%.

From a technical standpoint, the company’s share price has traded within a falling wedge pattern since early November but broke above the pattern’s top trendline in Wednesday’s session. Further upside momentum could see price test significant resistance levels at $99 and $104.

WEC Energy Group, Inc.

Milwaukee-based WEC Energy Group, Inc. (WEC) distributes gas and electricity to customers in Illinois, Michigan, Minnesota, and Wisconsin. Barclays analyst Eric Beaumont upgraded the company’s stock to ‘Equal-Weight’ from ‘Underweight’ this week, saying it has an above-average growth trajectory, similar to comparable industry peers. Beaumont maintained his 12-month price target on the shares at $107, indicating a 22% premium to Wednesday’s $87.86 close. The company pays a 3.18% dividend yield and trades 4.53% lower since the start of the year.

The stock rallied yesterday from the lower trendline of a two-month falling wedge pattern that finds support from the May and June swing lows around $84.50. A move higher from this area could see bulls test major resistance at  $105.50.

For a look at today’s earnings schedule, check out our earnings calendar.