What to Expect from PPL Corporation in 2017
Brexit and PPL
PPL Corporation (PPL) is an electric utility company based in Allentown, Pennsylvania. It’s the US electric utility company that’s most exposed to Brexit. Its stock rose more than 8% in the last three months and marginally outperformed it peers. PPL was hit in 2H16 after the United Kingdom’s Brexit referendum. On a positive note, the stock has done fairly well in 2017. What can investors expect in the near future?
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How does PPL look?
More than half of PPL’s business comes from its operations in the United Kingdom, while the rest comes from Kentucky and Pennsylvania. Its transmission and distribution utilities operating in both of these states are expected to accelerate its earnings growth due to increased capital spending.
PPL surprised Wall Street last month with better-than-expected 4Q16 earnings. The United Kingdom’s Brexit referendum was expected to have a negative impact on its cash flows due to the company’s significant operations in the United Kingdom. However, the company’s hedging strategies and its utilities’ strong performance boosted its quarterly earnings.
PPL Corporation’s geographic diversification could present a strategic advantage for it after Brexit blues are over and the British pound stabilizes. Its operations in the United Kingdom and the US offer PPL regulatory and customer diversification. A healthy regulatory framework in the United Kingdom provides a higher return on equity to PPL than the US average (XLU).