Is PPL Corp. (PPL) the Right Choice for Your Portfolio?
PPL Corporation PPL, a Zacks Rank #3 (Hold) stock, reported first-quarter earnings of 62 cents, which were in line with the Zacks Consensus Estimate, even though demand was affected by mild weather. The utility has a disciplined capital investment program and customer centric strategies, which will help it to ride over challenges posed by rising interest rates.
What’s Ahead?
PPL Corp. has a long-term capital-investment plan, which primarily focuses on infrastructure, construction projects for generation, transmission and distribution. The company aims to invest nearly $15.9 billion in the 2017–2021 timeframe.
Thanks to the consistent investment in regulated asset, the company expects its compound annual earnings to grow 5–6% from 2017 through 2020. Growth is likely to be driven primarily by strong rate base growth of 5%, compounded annually in regulated operations over 2016–2020.
In light of the fluctuating currency, PPL Corp. has reestablished its hedge levels to shield itself from any near-term decline in the GBP. It has hedged 100% of the GBP at an average rate of $1.21 per pound for the remaining year. Initiatives undertaken by the company have lowered its foreign currency risk substantially.
PPL Corp.’s operations are subject to fluctuations in weather conditions. The mild domestic winter temperature this season has adversely impacted earnings in the first quarter.
As a capital-intensive business, PPL Corporation’s operation is sensitive to developments in interest rates. Interest rates have increased twice in recent times and there are possibilities of further hikes this year. With its current ratio presently standing at 0.52, the company might find it difficult to borrow funds at a favorable rate.
Price Movement
Shares of PPL Corp have outperformed the Zacks-categorized Utility – Electric Power industry in the last six months. PPL Corp.’s shares gained 17.2%, compared with the industry’s gain of 10.8% in the aforesaid period.
We believe PPL Corp.’s disciplined capital investment program, stable financial position, hedging programs and customer-centric strategies will boost its performance.
Stocks to Consider
Investors can consider better-ranked stocks from the same industry such as NiSource Inc. NI, UNITIL Corporation UTL and Northwestern Corporation NWE.
UNITIL Corporation is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company reported a positive earnings surprise of 2.33% in the first quarter, while its 2017 estimates increased by 2 cents to $2.09 per share in the last 90 days.
Northwestern Corporation, a Zacks Rank #2 stock, reported a positive earnings surprise of 6.60% in the first quarter. Its 2017 estimates increased by a penny to $3.40 per share in the last 90 days.
NiSource Inc., another Zacks Rank #2 stock, reported in-line earnings in the first quarter while its 2017 estimates increased by two cents to $1.19 per share in the last 90 days.
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