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Market Price (2/18/2016): $76.21/share; ST-Target: $92/share; NIV: $108/share
DUK: Steady and sure-footed; becoming purer
Decision to exit International is one that we support 100% and is a thoughtful decision that illustrates the long-term shareholder value-oriented leadership and vision at DUK, in our opinion. Though dilutive in short-term, 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 that DUK will make additional transformative acquisitions, especially on gas-side of business. Awaiting North Carolina and Tennessee regulatory approval to close Piedmont. Transaction likely to close by YE2016. Demographics picking-up momentum but usage per customer is still fairly flat; we look for this dynamic 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 the high end of its 4%-6% AEPS CAGR through 2020, if not exceeding this target. We’re not excited about potential for industry moving towards cost-of-service gas programs.