To read the full note, please log-in and click on the following link:
Market Price (5/3/2016): $78.84/share; ST-Target: $92/share; NIV: $107/share
DUK: Strategic Shift On-track to Transform DUK
Sale of International is progressing. Though dilutive in ST, we believe this decision not only proves to be value-add in the MT-to-LT, but also likely to accelerate cash repatriation. Ash basin issues are largely in rearview mirror, but still in consciousness of management. We continue to believe DUK will make more transformative acquisitions, especially on gas-side of business. Awaiting NC regulatory approval to close Piedmont; TN approval granted in 1Q16. Transaction likely to close by YE2016. Demographics picking-up momentum but usage/customer is still fairly flat; we look for this to change moving forward. Investments in renewables and gas-fired generation helps DUK move away from coal and is the right move. We expect DUK to achieve high end of its 4%-6% AEPS CAGR through 2020, if not exceeding it thru development of both organic natural gas projects and acquired natural gas businesses. We’re not excited about potential for industry moving towards cost-of-service gas programs. 1Q16 results were below expectations by the amount incurred due to storm costs and lower than expected usage.