PPL Corporation’s PPL ongoing capital investments are expected to further strengthen its infrastructure. The company is also likely to benefit from new customer additions. The completion of the Narragansett Electric acquisition increases predictability of earnings.
However, this Zacks Rank #3 (Hold) company’s dependence on its subsidiaries and strong competition in the transmission business act as headwinds.
PPL’s capital investment plan primarily focuses on infrastructure construction projects for generation, transmission and distribution. Customers have been experiencing far less outages, courtesy of the ongoing investments in infrastructure strengthening. The company expects a regulated capital investment of $12 billion during 2023-2026.
The completion of the Narragansett Electric Company’s acquisition on May 25, 2022, substantiates PPL's strategic repositioning as an U.S.-focused energy company. The buyout will give PPL a more diversified asset portfolio, lowering income from coal generation and increasing the chances of investing in a sustainable energy future.
The company is also working on reducing its operating and maintenance (O&M) costs by at least $175 million through 2026. In 2023, PPL expects to save $50-$60 million in O&M costs. It is focused on reducing total operating expenses in the coming years, owing to a decrease in fuel costs and energy purchases.
PPL’s Pennsylvania Regulated segment faces competition for transmission projects. It has to abide by certain rules of the Federal Energy Regulatory Commission to develop transmission projects and structure costs for the same.
The company conducts all operations through its subsidiaries. In case the subsidiaries fail to perform as expected and are unable to pay dividends to PPL, the latter’s financial performance will be adversely impacted.
Stocks to Consider
Some better-ranked stocks from the same industry are Consolidated Edison ED, NiSource Inc.NI and IDACORP, Inc IDA, each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Consolidated Edison’s long-term (three to five year) earnings growth rate is 2%. The Zacks Consensus Estimate for ED’s 2023 earnings per share (EPS) indicates an increase of 6.81%.
NiSource’s long-term earnings growth rate is 6.9%. The Zacks Consensus Estimate for NI’s 2023 EPS implies an improvement of 6.8%.
IDACORP’s long-term earnings growth rate is 3.68%. The company delivered an average earnings surprise of 4.6% in the last four quarters.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report