On Friday, BMO Capital Markets updated its outlook on Duke Energy (NYSE:DUK), increasing the price target from $108.00 to $110.00, while reaffirming its Outperform rating on the stock. The adjustment follows a settlement agreement related to Duke Energy Carolinas' (DEC) ongoing electric rate case.
The settlement, involving DEC and various stakeholders including the Office of Regulatory Staff, was filed with the Public Service Commission of South Carolina (PSCSC). If approved, the agreement would result in a net base rate increase of $240 million for DEC, which is lower than the initially requested $323.1 million.
As part of the settlement, DEC would see a rate base of $7.5 billion and a return on equity (ROE) and equity layer set at 9.94% and 51.21% respectively. This represents a change from the currently authorized rates of 9.5% ROE and 53.0% equity layer.
BMO Capital Markets has adjusted its target price to align with the marked-to-market (M-T-M) peer group multiples, which reflects the terms of the proposed settlement. The firm remains positive on Duke Energy, continuing to endorse the stock with an Outperform rating.
The proposed settlement is currently pending approval by the PSCSC. If sanctioned, it will impact the financial structure of DEC, adjusting both the rate base and the return on equity to the levels stipulated in the agreement.
InvestingPro Insights
BMO Capital Markets' recent price target increase for Duke Energy (NYSE:DUK) to $110.00 signals confidence in the company's outlook, a sentiment that is echoed by some of the data available on InvestingPro. With a market capitalization of $79.94 billion and a P/E ratio that has adjusted to 17.93 in the last twelve months as of Q1 2024, Duke Energy appears to be trading at a valuation that reflects its near-term earnings growth. The company has also demonstrated revenue growth, with a 1.44% increase in the last twelve months and a more significant quarterly jump of 5.43% as of Q1 2024.
InvestingPro Tips highlight Duke Energy's status as a prominent player in the Electric Utilities industry, with a track record of raising its dividend for 16 consecutive years and maintaining dividend payments for 54 consecutive years. This consistency is reflected in a dividend yield of 3.99% as of the latest data. Additionally, while some analysts have revised their earnings downwards for the upcoming period, the company's stock generally trades with low price volatility and is currently trading near its 52-week high, at 99.61% of the peak price.
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