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Jim's
rating on
this stock |
STOCK
SYMBOL |
Closing
price that
day |
Full Company Name |
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DUK |
15.62 |
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Jim:
Today, the Duke of
Earl,
Duke Energy (DUK)...
one of the largest
electric utilities
in the country, and
absolutely one of my
favorite utilities
because of its
terrific 5.89%
yield, precisely the
kind of stock you
want to own in a
recession, which we
have been saying
over and over, is
upon us... reported
a disappointing
quarter, and it was
trashed... just laid
to waste... losing
$1.30 from $16.90,
down to $15.62.
Now, I'm worried...
I'm worried that
things will only
become more
difficult now that
the democrats have
taken the White
House, and expanded
their majorities in
the congress. If the
democrats pass a cap
in trade bill to
lower carbon
emissions, a big
coal burner like DUK
will get hit, so I
want to be
cautiously bullish
about this company,
as it's cheap, and
the yield to me
seems very safe.
DUK's quarter
doesn't bother me so
much... The company
missed earnings by
12 cents, reporting
33 cents of earnings
per share. The
Street was looking
for 45 cents.
Revenues fell by
4.9% year over year,
10.5% below
consensus.
Hey, but look...
When you break down
why the company
missed its
earnings... it took
a 3-cent ding from
storm-related
costs... the storm,
by the way,
Hurricane Ike, was
much worse than
people realize...
and lost another 6
cents from the
mark-to-market
impact of its
hedges, and lost
another 5 cents from
an accelerated
writedown on a real
estate joint
venture...
In other words,
nothing operating,
okay... nothing
operating. A lot of
one-time
(charges)...
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Continued below...
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Wednesday,
November 5, 2008
(Cont'd from
above)...
Domestic
business was
hurt in general,
because of
weaker weather
and lower
electricity
consumption, but
the company also
benefitted from
rate relief in
the midwest. DUK
recently worked
out a agreement
with Ohio, where
it will be paid
based on the
efficiency of
its
performance...
basically paid
based on
avoiding the
cost of new
electricity
generation. DUK
gets an extra $3
bucks a month
from customers
in this program.
That could raise
$11 billion
annually for
efficient fuel
R&D, while other
states get on
board.
So what I see
here is not a
broken
company... just
a broken stock.
DUK, which gets
66.5% of its
franchise power
generation from
coal, and 49% of
its wholesale
generation from
coal, should be
a big
beneficiary of
lower coal
prices. It's
gotten its
financing out of
the way, issuing
$2.4 billion in
debt in June,
withdrawing $1
billion from its
$3.2 billion in
master credit.
The company has
money to spare,
to pay for $4.7
billion of
capital
expenditures
next year, and
$1.2 billion in
dividends.
It has less debt
than its peers.
It has a wind
portfolio that I
find
attractive...
that's triple
the 3,000
megawatts... It
could
potentially grow
at an 8-10% pace
annually,
something that
could benefit
under Obama.
To get a better
picture of how
DUK's doing, how
the coal market
looks, and how
the electricity
market is
looking in
general, I want
to bring on
James Rogers,
perhaps the most
visionary CEO in
the utility
business, whom I
am thrilled to
have on the
show...
Mr. Rogers,
welcome to Mad
Money...
Jim's comments
AFTER the interview:
Alright, this is
a no-brainer. If
I'm President
Obama, I call
this guy
immediately and
I say, listen,
you're in
charge... you're
in charge of
everything
energy. He gets
it. He
understands it.
If you don't
believe that, go
read the
unbelievable New
York Times piece
about him in the
Sunday Magazine
issue in the
spring. Also,
understand... we
didn't get into
the dividend.
The dividend is
safe. I think
the dividend
could grow.
Duke Energy (DUK)...
smart company, a
good play.
Read Jim's next Segment
here
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