PPL Corporation's (PPL) Focus on Capital Investments Bodes Well
PPL Corporation’s PPL investment plan in strengthening infrastructure, focus on cleaner energy generation and growth in domestic operation are tailwinds.
The Zacks Consensus Estimate for the company’s 2020 earnings is pegged at $2.42 per share, which has been stable in the past 60 days. The utility’s 2021 earnings stands at $2.19 per share, which has moved 6.3% north in the past 60 days.
What’s Driving the Stock?
PPL Corporation’s capital investment plan primarily focuses on its infrastructure-construction projects for generation, transmission and distribution. The company expects to invest $13.8 billion during the 2020-2024 time frame, which will expand the rate base from $29.9 billion in 2020 to $34.2 billion in 2024, seeing a CAGR of 4%.
The company aims to exit its U.K. operations and post completion of its U.K. asset divestiture, it will no more be exposed to foreign currency risks. For 2020, the company hedged 100% of its foreign currency to safeguard its interest amid fluctuating prices. These hedges will help the utility perform as expected even if the forex rate falls below the current level.
PPL Corporation had liquidity worth more than $4 billion as of Sep 30, 2020. Such strong liquidity is sufficient to meet its near-term debt obligations.
Moreover, PPL Corporation has a target set to reduce 80% carbon emission by 2050 from its 2010-levels by introducing carbon capture technology and adding more renewable sources to its energy-generation portfolio. Apart from the company, utilities like Duke Energy DUK, DTE Energy DTE and Avista Corporation AVA also chalked out plans to lower carbon footprint in a pledge to offer a pollution-free environment.
Woes
However, unplanned outages at power plants may increase PPL Corporation’s expenses. Also, pollution-control execution costs and legal costs may weigh on its finances. Further, stringent laws and regulations may impact PPL Corporation’s revenues negatively.
Zacks Rank & Price Performance
In the past six months, shares of this currently Zacks Rank #2 (Buy) company have gained 5.3%, underperforming the industry’s rise of 8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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