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PPL Stock Gains 20% Year to Date: What Should Investors Do Now?
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PPL Corp.’s (PPL - Free Report) shares have rallied 20% year to date, compared with its industry’s growth of 13%. The company continues to provide electricity and natural gas to its 3.5 million customers across the United States. In the same time period, PPL has outperformed its sector and the S&P 500.
PPL plans to invest $14.3 billion through 2027 to strengthen its infrastructure and prevent outages. The company is also working to lower emissions from electricity production and develop a net-zero energy system by 2050.
PPL Outperforms Industry, Sector & S&P YTD
Image Source: Zacks Investment Research
Factors Acting as Tailwind for PPL Stock
The demand for clean energy is increasing in PPL’s service territories and the company is generating more clean energy to meet rising demand. PPL is replacing old coal plants with natural gas, renewables and battery storage. The company is utilizing artificial intelligence (“AI”) and other advanced technologies to better manage supply and demand on the power grid.
PPL is experiencing load growth, driven by data center demand located in its Pennsylvania and Kentucky service territories. The company is in an advanced stage of discussion for 5 gigawatts (GW) of electricity supply to the data center operators. PPL can benefit from the rising demand for data centers as the new AI-driven data centers require more electricity compared with conventional data centers. The company can experience more demand from the data centers with over 17 GWs of potential projects in the queue from the 2026 -2033 period.
PPL is developing an energy system that is reliable and affordable for customers and continues to make investments to strengthen the grid, electricity transmission and electricity and gas distribution. System hardening will prevent outages and improve restoration times in the face of more frequent and severe storms.
PPL is managing its operations efficiently and reducing its operation and maintenance (O&M) expenses by an average of 2.5% annually. The company aims to deliver at least $175M of annual savings by 2026 from 2021. The efficiency drive keeps the rates affordable for customers and will attract more customers.
PPL operates in a constructive regulatory jurisdiction. Over 60% of PPL’s capital investment plan is subject to “contemporaneous recovery,” and it reduces the impact of regulatory lag on earnings for investments. The recovery of the capital expenditure quickly allows the company to fund its long-term projects easily.
PPL’s Earnings Estimates Moving North
PPL expects its 2024 EPS in the range of $1.63-$1.75 compared with $1.60 per share registered in 2023. The Zacks Consensus Estimate for PPL’s 2024 and 2025 earnings per share indicates year-over-year growth of 7.5% and 6.7%, respectively. The year-over-year increase in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
PPL Stock Returns Higher Than the Industry
PPL’s trailing 12-month return on assets is 3.3%, ahead of the industry average of 2.8%. Return on asset (ROA) is a financial ratio that measures how well a company uses its assets to generate profit. The current ROA of the company indicates that it is using its assets more efficiently than its peers.
Image Source: Zacks Investment Research
PPL Delivers Value to Shareholders
PPL continues to return value to its shareholders through dividend payments.
The company expects to increase its earnings per share in the range of 6-8% annually through 2027, subject to its board’s approval. The current annual dividend of the company is $1.03. It projects dividend growth of 6-8% per year through 2027, on par with its earnings growth expectation.
PPL’s payout ratio at the end of 2023 was 59%. With continued strength in its earnings and cash flow growth, PPL is expected to continue boosting its dividend going forward. Check PPL’s dividend history here.
PPL Currently Trading at a Premium
PPL is currently valued at a premium compared to its industry on a forward 12-month P/E basis. Given its high valuation at present, it is better to hold positions in the stock and wait for a better entry point.
Image Source: Zacks Investment Research
Summing Up
PPL's investment in increasing clean energy production volumes and strengthening its grid will assist in providing reliable service to its customers. Efficient management of operations and constructive regulatory jurisdiction add to the company’s advantage.
Given the improvement in earnings estimates and return on assets, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility.
Image: Bigstock
PPL Stock Gains 20% Year to Date: What Should Investors Do Now?
PPL Corp.’s (PPL - Free Report) shares have rallied 20% year to date, compared with its industry’s growth of 13%. The company continues to provide electricity and natural gas to its 3.5 million customers across the United States. In the same time period, PPL has outperformed its sector and the S&P 500.
PPL plans to invest $14.3 billion through 2027 to strengthen its infrastructure and prevent outages. The company is also working to lower emissions from electricity production and develop a net-zero energy system by 2050.
PPL Outperforms Industry, Sector & S&P YTD
Image Source: Zacks Investment Research
Factors Acting as Tailwind for PPL Stock
The demand for clean energy is increasing in PPL’s service territories and the company is generating more clean energy to meet rising demand. PPL is replacing old coal plants with natural gas, renewables and battery storage. The company is utilizing artificial intelligence (“AI”) and other advanced technologies to better manage supply and demand on the power grid.
PPL is experiencing load growth, driven by data center demand located in its Pennsylvania and Kentucky service territories. The company is in an advanced stage of discussion for 5 gigawatts (GW) of electricity supply to the data center operators. PPL can benefit from the rising demand for data centers as the new AI-driven data centers require more electricity compared with conventional data centers. The company can experience more demand from the data centers with over 17 GWs of potential projects in the queue from the 2026 -2033 period.
PPL is developing an energy system that is reliable and affordable for customers and continues to make investments to strengthen the grid, electricity transmission and electricity and gas distribution. System hardening will prevent outages and improve restoration times in the face of more frequent and severe storms.
PPL is managing its operations efficiently and reducing its operation and maintenance (O&M) expenses by an average of 2.5% annually. The company aims to deliver at least $175M of annual savings by 2026 from 2021. The efficiency drive keeps the rates affordable for customers and will attract more customers.
PPL operates in a constructive regulatory jurisdiction. Over 60% of PPL’s capital investment plan is subject to “contemporaneous recovery,” and it reduces the impact of regulatory lag on earnings for investments. The recovery of the capital expenditure quickly allows the company to fund its long-term projects easily.
PPL’s Earnings Estimates Moving North
PPL expects its 2024 EPS in the range of $1.63-$1.75 compared with $1.60 per share registered in 2023. The Zacks Consensus Estimate for PPL’s 2024 and 2025 earnings per share indicates year-over-year growth of 7.5% and 6.7%, respectively. The year-over-year increase in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
PPL Stock Returns Higher Than the Industry
PPL’s trailing 12-month return on assets is 3.3%, ahead of the industry average of 2.8%. Return on asset (ROA) is a financial ratio that measures how well a company uses its assets to generate profit. The current ROA of the company indicates that it is using its assets more efficiently than its peers.
Image Source: Zacks Investment Research
PPL Delivers Value to Shareholders
PPL continues to return value to its shareholders through dividend payments.
The company expects to increase its earnings per share in the range of 6-8% annually through 2027, subject to its board’s approval. The current annual dividend of the company is $1.03. It projects dividend growth of 6-8% per year through 2027, on par with its earnings growth expectation.
PPL’s payout ratio at the end of 2023 was 59%. With continued strength in its earnings and cash flow growth, PPL is expected to continue boosting its dividend going forward. Check PPL’s dividend history here.
PPL Currently Trading at a Premium
PPL is currently valued at a premium compared to its industry on a forward 12-month P/E basis. Given its high valuation at present, it is better to hold positions in the stock and wait for a better entry point.
Image Source: Zacks Investment Research
Summing Up
PPL's investment in increasing clean energy production volumes and strengthening its grid will assist in providing reliable service to its customers. Efficient management of operations and constructive regulatory jurisdiction add to the company’s advantage.
Given the improvement in earnings estimates and return on assets, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.