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Why Is PPL (PPL) Down 0.4% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for PPL (PPL). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PPL due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

PPL Corp Q2 Earnings Beats Estimates, Revenues Down Y/Y

PPL Corporation reported second-quarter 2019 adjusted earnings per share (EPS) of 58 cents, which beat the Zacks Consensus Estimate of 56 cents by 3.6%. The figure rose 5.5% year over year, primarily on strong operational performance by regulated utilities.

On a GAAP basis, the company generated EPS of 60 cents compared with 73 cents in the year-ago quarter. The difference between GAAP and operating earnings stemmed from benefit in the U.K. Regulated segment.

Total Revenues

The company generated revenues worth $1,803 million in the second quarter, which declined 2.4% year over year from the year-ago quarter’s tally of $1,848 million.

Segment Results

U.K. Regulated: Adjusted earnings were 36 cents per share, flat compared with the prior-year quarter’s figure. Dilution impacted second-quarter earnings in the segment.

Kentucky Regulated: Adjusted earnings were 13 cents, up from 12 cents in the year-ago quarter.  The upside can be primarily attributed to higher retail rates effective May 1, 2019, and lower income taxes.

Pennsylvania Regulated: Adjusted earnings were 13 cents, up 18.2% from the prior-year quarter’s figure. The results benefited from timing impacts related to U.S. tax reform, returns on additional capital investments in transmission as well as lower operation and maintenance expenses.

Corporate and Other: The segment incurred a loss of 4 cents in the quarter, flat year over year.

Operational Highlights

PPL Corp’s total operating expenses fell 2.3% year over year to $ 1,163 million in the quarter.

The company generated operating income of $640 million, lower than $658 million in the prior-year quarter.

Interest expenses up 4.7% to $246 million from the year-ago quarter’s tally of $235 million.

Financial Position

As of Jun 30, 2019, the company had cash and cash equivalents of $406 million compared with $621 million as of Dec 31, 2018.

Long-term debt (excluding debts due within a year) was $20,965 million as of Jun 30, 2019 compared with $20,069 million as of Dec 31, 2018.

Net cash flow from operating activities in the first six months of 2019 was $1,070 million compared with $1,325 million in year-ago period.

Guidance

PPL Corp reaffirmed guidance for 2019 EPS from ongoing operations in the range of $2.30-$2.50 with a midpoint of $2.40. The projected figure is lower than the Zacks Consensus Estimate of $2.42.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, PPL has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, PPL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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