BMO raises Duke Energy stock target to $124, maintains outperform

On Monday, BMO Capital Markets updated its outlook on Duke Energy (NYSE:DUK), increasing the stock’s price target to $124 from the previous $119, while reaffirming an Outperform rating. The adjustment follows a favorable regulatory decision for Duke Energy Indiana (DEI). Duke Energy, with a market capitalization of $86.5 billion, stands as a prominent player in the Electric Utilities industry. According to InvestingPro data, the company has maintained dividend payments for an impressive 55 consecutive years, demonstrating strong financial stability.

The Indiana Utility Regulatory Commission (IURC) issued a final order in DEI’s general rate case, approving a two-step revenue requirement increase of $296 million. This figure represents approximately 60% of the originally requested $492 million. The approved revenue requirement is based on a slightly elevated return on equity (ROE) of 9.75%, with no changes to the equity layer and a $12.5 billion rate base. The company’s current revenue stands at $29.8 billion, with a healthy gross profit margin of 49.9%.

BMO Capital’s analyst highlighted the significance of this outcome, stating that Duke Energy has largely mitigated risks associated with its regulatory calendar. This allows investors to shift their focus to the company’s upcoming five-year financial outlook update, which is expected to provide additional details on load growth, rate base expansion, and financing strategies.

The forthcoming comments from Mr. Sideris, poised to become Duke Energy’s next CEO, are also anticipated with interest. His vision for the company is considered an important factor for its future direction.

The analyst from BMO Capital expressed a favorable view of Duke Energy’s stock, citing its modest relative premium, the reduced regulatory risks, and the increasingly visible growth in earnings per share and load driven by economic development. The next significant event for investors to watch is the fourth-quarter 2024 earnings call, scheduled for February 13, which is expected to act as a catalyst for the stock. With a P/E ratio of 20.5 and a dividend yield of 3.7%, Duke Energy currently trades above its InvestingPro Fair Value. For deeper insights into Duke Energy’s valuation and 8 additional ProTips, including detailed financial analysis and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Duke Energy has appointed Harry Sideris as the new CEO, succeeding Lynn Good who is retiring after over two decades of service. This notable leadership transition comes as Duke Energy continues to invest in grid upgrades and cleaner energy generation. On the financial front, Duke Energy has submitted a plan to recover $1.1 billion in costs incurred during the 2024 hurricane season, which resulted in power restoration to approximately 2 million customers. These developments follow the company’s recent earnings report, which showed a decrease in earnings per share to $1.62 due to storm-related costs. However, Duke Energy still anticipates a 5% to 7% earnings per share growth rate through 2028, backed by regulatory approvals and infrastructure investments. In analyst news, Citi has maintained a Buy rating on Duke Energy, while BMO Capital has adjusted its price target to $124, maintaining an Outperform rating. These recent updates highlight the ongoing strategic planning and resilience of Duke Energy in the face of operational and environmental challenges.

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