Duke Energy's fundamentals are hard to ignore

With the markets still in a choppy/consolidation mode (or perhaps worse), it's best to consider including a few defensive stocks in your portfolio, and with the above in mind Duke Energy is worth an evaluation.

If you're looking for a balanced, longer-term utilities play, consider Duke Energy (NYSE: DUK).

Duke is that rare type of utility that offers investors an ample amount of safety, an adequate dividend, and the potential for capital gain upside via growth.

In general, analysts expect DUK to register solid revenue results in 2008-2009. Duke has exited several higher-risk businesses, and what's left is impressive, particularly in a choppy, uncertain stock environment: 3.9 million utilities customers in the South and Midwest, 8,700 MW of unregulated generating capacity in the U.S., 4,200 MW of generating capacity in Latin America, and 500,000 natural gas customers. Further, given current population projections in the South, the long-term trends look good for a considerable portion of Duke's operations.

Other positives: Look for Duke to better-utilize its Midwest gas-fired plants and maintain cost-control discipline, in the years ahead. Finally, DUK's 88 cent annual dividend adds to the mix. The Reuters F2008/F2009 EPS consensus estimates for DUK are $1.27/$1.35.

The risks? Duke's revenue could be hurt if a generally-favorable regulatory stance in its regions changes. An unusually cool summer could also keep revenue below analysts' expectations. Don't look for a major upside revenue surprise with Duke, but everything else, from a utilities investment standpoint, lines up.

The First Call mean rating for DUK is: Hold. [18 firms.] Mean 2008 target: $20 [high: $23, low: $18.]

Stock Analysis: Duke Energy is a moderate-risk stock not suitable for low-risk investors. Consider buying Duke's shares if your portfolio does not contain a utilities stock. Investors with an investment horizon longer than 2 years should be rewarded from DUK's shares. Sell / Stop Loss if you were to purchase shares in this company: $13.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.