PPL Rides on Investments, Focuses on Clean Power Generation
PPL Corporation’s PPL ongoing capital investments to strengthen infrastructure and the completion of the Narragansett Electric acquisition increase its earnings potential. The company’s focus on cleaner power generation and growth in domestic operation acts as a tailwind.
However, this Zacks Rank #3 (Hold) company’s dependence on its subsidiaries and rising competition in the transmission business act as headwinds.
Tailwinds
PPL expects a regulated capital investment of $12 billion during 2023-2026 and plans nearly $2.5 billion in capital investments for 2023. The company’s capital investment plan primarily focuses on infrastructure construction projects for generation, transmission and distribution. Customers have been experiencing far less outages, courtesy of the ongoing investments for strengthening PPL’s infrastructure.
The company plans to achieve its carbon emissions target of 70% by 2035 and 80% by 2040, from its 2010 levels. It will do so through the introduction of new carbon capture technology and the addition of more renewable sources to its generation portfolio.
The completion of the Narragansett Electric Company’s acquisition on May 25, 2022, gives PPL a more diversified asset portfolio, lowering income from coal generation and increasing the chances of investing in a sustainable energy future.
The company is working to lower outstanding debt and strengthen the balance sheet. It is also focused on reducing its operating and maintenance (O&M) costs by at least $175 million through 2026. In 2023, it expects to save $50-$60 million in O&M costs. PPL expects to reduce total operating expenses in the coming years, owing to a decrease in fuel cost and energy purchases.
Headwinds
The company conducts all operations through its subsidiaries. PPL’s consolidated assets are also held by its subsidiaries. Its ability to repay debt, guarantee obligations and pay dividends is largely dependent upon the earnings of those subsidiaries.
PPL’s Pennsylvania Regulated segment faces competition for transmission projects. It has to abide by certain rules of the Federal Energy Regulatory Commission to develop transmission projects and structure the cost for the same.
Stocks to Consider
Some better-ranked stocks from the same industry are Consolidated Edison ED, NiSource Inc.NI and NextEra Energy, Inc. NEE, each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Consolidated Edison’s long-term (three to five year) earnings growth rate is 2%. The Zacks Consensus Estimate for ED’s 2023 earnings per share (EPS) indicates an increase of 6.8% year over year.
NiSource’s long-term earnings growth rate is 7%. The Zacks Consensus Estimate for NI’s 2023 EPS implies an improvement of 8.2% from the previous year’s reported figure.
NextEra Energy’s long-term earnings growth rate is 8.38%. The Zacks Consensus Estimate for NEE’s 2023 EPS indicates growth of 7.2% year over year.
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