PPL Meets Earnings Est, Misses Rev

Zacks

and UK. The company currently has a Zacks Rank #3 (Hold).PPL Corporation (PPL) announced first-quarter 2013 pro forma earnings of 71 cents per share, in line with the Zacks Consensus Estimate. However, quarterly earnings were a penny higher than the year-ago figure.

Improvement in earnings was driven by 133.3%, 19.4% and 66.7% year-over-year rises in the Kentucky Regulated, U.K. Regulated and Pennsylvania Regulated segments’ earnings, respectively. The growth was partially offset by a 59.2% year-over-year decline in Supply segment’s earnings.

GAAP earnings were 65 cents versus 93 cents a year-ago. The difference of 6 cents between GAAP and pro forma earnings were due to a charge of 18 cents associated with adjusted energy-related economic activity in the Supply segment; partially offset by a 12 cents gain from foreign currency-related economic hedges in the U.K. Regulated segment.
 
Revenue

PPL Corporation reported total operating revenues of $2.5 billion, missing the Zacks Consensus Estimate by $0.8 billion. Quarterly revenues decreased 40.2% year over year primarily due to lower contribution from wholesale energy marketing segment.

First-Quarter Operational Update

Total operating expenses were $1.8 billion, down 42.4% year over year mainly owing to a decline in energy purchase expenses.

The decrease in revenues was less than offset by lower total operating expenses, which has affected operating income. The company’s operating income decreased 34.1% year over year to $0.7 billion.

Financial Update

As of Mar 31, 2013, the company had cash and cash equivalents of $853 million versus $901 million as of Dec 31, 2012.

Long-term debt as of Mar 31, 2013 was $18.9 billion compared with $18.7 billion as of Dec 31, 2012.

Net cash provided by operating activities during the first three months of 2013 was $0.2 billion, lower than $0.7 billion in the year-ago comparable period.

Guidance

PPL Corporation projected full-year 2013 earnings in the range of $2.15–$2.40 per share, with a midpoint of $2.27.

Earnings in 2013 are expected to decline from the 2012 level primarily due to lower Supply segment earnings; partially offset by higher earnings from all three regulated segments, dilution of 21 cents per share related to shares for the 2010 and 2011 equity units and the impact of the Apr 2012 forward stock sale.

Other Utility Company Releases

Exelon Corporation (EXC) announced first quarter operating earnings of 70 cents per share, beating the Zacks Consensus Estimate by 2 cents.

Entergy Corporation (ETR) reported first quarter operational earnings of 94 cents per share that came at par with the Zacks Consensus Estimate.

American Electric Power Co. Inc. (AEP) reported first quarter earnings of 80 cents per share that were in line with the Zacks Consensus Estimate.

Our View

We view PPL Corporation as an organization with a well diversified asset portfolio and strong business models, which are adaptable to a wide range of market coverage. In addition, the company’s strong financial position enables it to acquire AES Ironwood, L.L.C and AES Prescott, L.L.C to strengthen its natural gas portfolio.

We also appreciate the company’s effort toward upgrading its midstream infrastructure to provide uninterrupted electric supply to its customers.

However, stringent regulations and risks associated with delay and cancellation of several important projects, may to some extent restrict the company’s future performance.

Allentown, Pa.-based PPL Corporation generates and delivers electricity and natural gas to more than 10 million customers in the U.S.

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