Is Duke Energy Stock Poised to Rise in 2024?

Duke Energy stock price

Key points

  • Duke Energy shares are falling after losing revenue and earnings. The results show that the company is still grappling with higher interest rates for a longer period.
  • The utilities sector was the worst performer in 2023, but that may be about to change.
  • Strong fundamentals and a more attractive valuation make DUK shares an attractive choice for investors looking to stay ahead of inflation.
  • 5 stocks we like better than Duke Energy

Duke Energy Corp. NYSE: United Kingdom is down 3.9% since missing earnings and revenue in its fourth quarter and full-year 2023 earnings report on Feb. 8, 2023. It was the second consecutive quarter in which the company missed revenue.

This does not surprise investors. Rising interest rates have hit the utilities sector, which was the worst-performing sector in 2023. But with the possibility of lower, or at least stable, interest rates in 2024, it may be coming time for prudent investors to consider the total return they can earn. obtain from the actions of public utility services.

If so, DUK stock looks like a solid pick.

Utilities appear poised to make a comeback

The utilities sector was the worst performer in 2023. This was quite an adjustment for buy-and-hold investors who had become accustomed to returns of around 11% in the utilities sector of public utility after the 2008 financial crisis.

The catalyst for the strong performance was low interest rates. This helps utilities keep capital costs low as they invest in new projects.

However, utilities tend to underperform the market in a rising interest rate environment. In this case, rising interest rates caused investors to start taking a closer look at premium valuations. This means 2023 has been a tough year for utility stocks. THE Utilities Select Sector SPDR Fund NYSEARCA: XLU it has fallen more than 10% in the last 52 weeks.

Historically, sectors that underperform in one year tend to outperform the following year. The upside for utilities is their fundamentals, which look more attractive as valuations have fallen.

But what to buy? You could buy shares of a fund like XLU and be done with it. But there may be a reason to be more selective. And Duke Energy seems like a strong choice.

As in real estate, location matters

Duke Energy provides electricity to approximately 8.2 million customers in six states, including North Carolina, South Carolina and Florida. The company also supplies natural gas to more than 1.6 million customers in five states, including the Carolinas.

This is significant because, as in real estate, location matters in utility markets. Carolina and Florida were three of the states that gained the most population from 2020. In its most recent earnings presentation, Duke reported customer growth of 2.1% in Carolina and 2% in Florida from 2022 to 2023 .

And in the same presentation, Duke demonstrated the correlation between total population growth and energy consumption, which will keep the company’s revenue strong.

Are DUK shares a buy?

Analyst sentiment is softening slightly. Since the earnings report was released. Duke Energy analyst ratings on MarketBeat show several analysts lowering their price targets following the earnings release.

However, the price targets are still higher than the current DUK share price and would mean share price growth of 7.9%. This would be good news for investors who have seen the stock return only about 2.6% over the past five years.

And investors are buying Duke stock with a forward P/E ratio of 15.49. This is in line with the industry average and well below the stock’s 10-year average of more than 26 times earnings.

For its part, Duke expects an average total return of about 10% between now and 2028. This assumes earnings growth of between 5% and 7%. Over the next 12 months, Duke estimates earnings growth of 6% in line with the company’s dividend, which currently yields 4.43%.

To summarize, if you are looking to beat the market, there may be better options. But if you’re looking for stocks that can keep you ahead of inflation, DUK stock looks like a solid choice.

Before you consider Duke Energy, you’ll want to hear this.

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While Duke Energy currently has a “Moderate Buy” rating among analysts, top analysts believe these five stocks are better buys.

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