Duke Energy Corp. (NYSE: DUK) is down 3.9% since missing on the top and bottom lines in its fourth quarter and full-year 2023 earnings report on February 8, 2023. It was the second consecutive quarter the company missed on revenue.  

This isn't surprising to investors. Rising interest rates have affected the utility 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 time for prudent investors to consider the total return they can get from utility stocks.  

In that case, DUK stock looks like a solid choice.  

Utilities look ready to mount a comeback 

The utilities sector was the worst-performing sector in 2023. This was a real adjustment for buy-and-hold investors who had become used to approximately 11% returns in the utility sector since the financial crisis in 2008.  

The catalyst for the strong performance was low interest rates. This helps utility companies keep their 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 meant that investors began to take a closer look at premium valuations. And that meant 2023 was a rough year for utilities stocks. The Utilities Select Sector SPDR Fund (NYSEARCA: XLU) is down over 10% in the last 52 weeks.  

Historically, sectors that underperform in one year tend to outperform the following year. The case for utilities is in their fundamentals, which look more appealing as valuations have come down.  

But what to buy? You could buy shares of a fund like the XLU and call it a day. But there may be an argument for being more selective. And Duke Energy looks like a strong choice.  

Like real estate, location matters 

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

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

And in that same presentation, Duke gave evidence of the correlation between total population growth and energy consumption, which will keep the company's revenue strong.  

Is DUK stock a buy? 

Analyst sentiment is softening a little bit. Since the earnings report was released. The Duke Energy analyst ratings on MarketBeat show several analysts lowering their price targets since the earnings release.  

However, the price targets are still above the current DUK stock price and would mean stock price growth of 7.9%. That would be welcome news to investors who have seen the stock only return around 2.6% in the last five years.  

And investors are getting Duke stock at a forward price-to-earnings ratio of 15.49. That aligns with the sector average and well below the stock's ten-year average of over 26x earnings.  

For its part, Duke is projecting an average total return of approximately 10% between now and 2028. That presumes between 5% and 7% earnings growth. In the next 12 months, Duke estimates 6% earnings growth to go along with the company's dividend, which currently yields 4.43%.  

To sum it up, if you're looking to beat the market, there may be better options. But if you're looking for equities that may keep you ahead of inflation, DUK stock looks like a solid choice.