Will PPL’s 1Q17 Earnings Set a Strong Tone for 2017?
PPL expects higher revenues in 1Q17
Pennsylvania-based PPL Corporation (PPL) is expected to report its 1Q17 financial results on April 27, 2017. Analysts estimate that PPL will report total revenues of $2.05 billion in 1Q17. In the corresponding quarter last year, it reported revenues of $2.01 billion.
$26 billion PPL is one of the most internationally diversified utilities in the sector (XLU). It generates more than half of its revenues from its operations in the United Kingdom, while the rest comes from Kentucky and Pennsylvania.
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In comparison, PPL’s peer and largest regulated utility, Duke Energy (DUK), had a strong business presence in Latin America. However, it exited that geography last year due to weak performance. California utility Sempra Energy (SRE) is another utility with an international presence.
Weather plays an important role in utilities’ earnings, as it drives electricity consumption. In the US, heating degree days in 1Q17 were 5% lower than heating degree days in 1Q16. Milder weather might have a negative impact on utilities’ (XLU) first quarter revenues.
Electricity demand growth is expected to stay subdued in 2017 due to energy efficiency programs. According to the U.S. Energy Information Administration, electricity generation is estimated to fall 0.7% this year compared to 2016. Lower electricity generation could have a negative impact on utilities’ revenues this year. On the positive side, electricity prices are expected to increase this year, which might partially offset the effect. We’ll discuss US electricity prices in detail in the next part of the series.