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Stock Analyst Update

NextEra Reportedly Pursues Duke Energy; Duke Rebuffs

We are maintaining our fair value estimates and moat trends for both of these companies in the utilities sector.

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We are maintaining our $250 per-share fair value estimate for NextEra Energy (NEE) and $92 fair value estimate for Duke Energy (DUK) after reports that Duke declined a takeover bid from NextEra in what would be the largest utility deal ever. Our narrow moat and stable moat trends for both utilities remain unchanged.

The financial terms of the reported offer weren't disclosed, but we believe NextEra would have plenty of leeway with its premium currency. NextEra currently trades at 28 times forward earnings, and a 13% premium to our fair value estimate, compared with just 15 times forward earnings for Duke. We also think there would be the potential for sizable operating synergies, particularly in Florida.

Andrew Bischof does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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