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PPL Corporation (NYSE:PPL): Is It A Smart Long Term Opportunity?

In September 2018, PPL Corporation (NYSE:PPL) released its earnings update. Generally, it seems that analyst forecasts are fairly optimistic, as a 19% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of 3.2%. Currently with trailing-twelve-month earnings of US$1.1b, we can expect this to reach US$1.3b by 2019. Below is a brief commentary around PPL’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for PPL

How is PPL going to perform in the near future?

Over the next three years, it seems the consensus view of the 12 analysts covering PPL is skewed towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of PPL’s earnings growth over these next few years.

NYSE:PPL Future Profit December 12th 18

From the current net income level of US$1.1b and the final forecast of US$1.5b by 2021, the annual rate of growth for PPL’s earnings is 7.5%. EPS reaches $2.63 in the final year of forecast compared to the current $1.64 EPS today. With a current profit margin of 15%, this movement will result in a margin of 19% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For PPL, I’ve put together three pertinent factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is PPL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PPL is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PPL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.