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PPL Corp's (PPL) Systematic Capital Investments Bode Well

Zacks Equity Research
·3 min read

PPL Corporation’s PPL ongoing capital investments to strengthen its infrastructure, focus on cleaner generation, growth in domestic operation, as well as hedging programs are tailwinds.

The company delivered a positive earnings surprise of 1.05% in the last reported quarter.

What’s Driving the Stock?

PPL Corporation has a strong liquidity position and will be able to defer capital spending if necessary. The company had a liquidity of $4.7 billion as of Apr 30, 2020, which is sufficient to meet its near-term debt obligation. Its times interest earned ratio was at 3.3 in the first quarter, higher than the 3.2 in fourth-quarter 2019. This strong ratio indicates that the firm will be able to meet debt obligations in the near future without any difficulties.

PPL Corporation’s capital-investment plan primarily focuses on infrastructure construction projects for generation, transmission and distribution. After investing $29 billion in the past decade, the company intends to invest nearly $14 billion through 2020-2024. These planned investments will expand the rate base from $29.9 billion in 2020 to $34.2 billion in 2024 at a CAGR of 4%.

PPL Corporation has a long history of dividend payment. Last November, the company announced a quarterly common stock dividend of 41.25 cents per share, which was paid on Jan 2, 2020. On Feb 14, 2020, it announced an increase of its quarterly common stock dividend to 41.5 cents per share. This marked the company’s 297th consecutive quarterly dividend payout. The strong cash-flow generation capacity enables the company to pay consistent dividend to shareholders.

However, unplanned outages at power plants as well as stringent laws and regulations outside the United States are headwinds for PPL Corporation.

Zacks Rank & Price Performance

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 12 months, shares of the company have lost 14.4% compared with the industry’s decline of 6.7%.

Stocks to Consider

A few better-ranked stocks from the same sector are Southwest Gas Corporation SWX, Sempra Energy SRE and NextEra Energy, Inc. NEE. All three stocks hold a Zacks Rank #2 (Buy) at present.

The long-term earnings growth rate of Southwest Gas, Sempra Energy and NextEra Energy is pegged at 6%, 6.90% and 7.70%, respectively.

Southwest Gas, Sempra Energy and NextEra Energy delivered a positive earnings surprise of 3.92%, 32.76% and 7.69%, respectively, in the last reported quarter.

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