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PPL Corp (PPL) Up 4.4% Since Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for PPL Corporation PPL. Shares have added about 4.4% in that time frame, underperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

PPL Corp. Beats on Q4 Earnings, Reaffirms '17 View

PPL Corp. reported fourth-quarter 2016 adjusted earnings of $0.60 per share, topping the Zacks Consensus Estimate of $0.52 by 15.4%. Reported earnings also surged 39.5% on a year-over-year basis.

On a GAAP basis, the company posted earnings per share of $0.68 in the quarter, compared with $0.59 a year ago. The difference between GAAP and operating earnings in the reported quarter was due to $0.08 of foreign currency-related economic hedges.

Full-year adjusted earnings came in at $2.45, up 10.8% from $2.21 in 2015 and beat the Zacks Consensus Estimate of $2.37 by 3.4%.

Full-year GAAP earnings amounted to $2.79, up 176% year over year.

Total Revenue

PPL Corp.’s total revenue of $1,832 million in the fourth quarter missed the Zacks Consensus Estimate of $2,209 million but were up 2.9% from the year-ago tally of $1,780 million.

Full-year revenues amounted to $7,517 million, down 2% from $7,669 million in 2015. The Zacks Consensus Estimate was $7,800 million.

Segment Results

UK Regulated: Adjusted earnings of $0.40 per share surged 38% from the prior-year figure of $0.29. This was primarily backed by the Apr 1, 2016 price increase, and lower operation and maintenance expenses, partially offset by the adverse impact of lower British pound sterling exchange rates.

Kentucky Regulated: Adjusted earnings increased by 3 cents to 12 cents per share. This was primarily due to higher sales volumes, which in turn resulted from favorable weather and lower operation and maintenance expense.

Pennsylvania Regulated: Adjusted earnings in the reported quarter increased by 2 cents per share to 11 cents driven primarily by higher base electricity rates for distribution effective Jan 1, 2016, and higher transmission margins.

Corporate and Other: It includes unallocated corporate-level financing and other costs. Adjusted loss narrowed from 4 cents to 3 cents per share.

Operational Highlights

PPL Corp.’s total operating expenses decreased 3.9% year over year to $1,118 million in the reported quarter, primarily due to a decline in other operation and maintenance expenses.

The company registered operating income of $714 million, up 15.7% from $617 million a year ago.

Interest expenses were down to $217 million from $226 million a year ago.

Financial Position

As of Dec 31, 2016, PPL Corp. had cash and cash equivalents of $341 million, compared with $836 million as of Dec 31, 2015.

Long-term debt (excluding debts due within one year) was $17,808 million as of Dec 31, 2016, compared with $18,563 million as of 2015 end.

In 2016, net cash flow from operating activities (continuing operations) was $2,890 million, compared with $2,272 million in the prior-year period.

Guidance

PPL Corp. has reiterated its 2017 adjusted earnings guidance in the range of $2.05–$2.25 per share (midpoint: $2.15 per share).The midpoints of the adjusted earnings guidance for UK Regulated, Kentucky Regulated and Pennsylvania Regulated are $1.18, 58 cents and 50 cents, respectively, for the year.

The company expects annual earnings growth of 5–6% between 2017 and 2020.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates.

PPL Corporation Price and Consensus

 

PPL Corporation Price and Consensus | PPL Corporation Quote

VGM Scores

Currently, PPL Corp.'s stock has a subpar Growth Score of 'D', however its Momentum is doing a bit better with a 'C'. Following the exact same course, the stock was allocated also a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the stock is suitable for value and momentum investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from stock in the next few months.


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