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How Do Brokers Look at PPL after Its 2Q16 Earnings?

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Price targets

According to Wall Street analysts’ estimates, PPL Corporation (PPL) has a price target of $38.71—compared to its current market price of $35.91. This implies an estimated upside of 8% in the next year.

Of the 19 analysts tracking PPL, four analysts gave it a “buy” recommendation and 15 analysts gave it a “hold” recommendation. None of the analysts gave it a “sell” recommendation as of August 11, 2016.

Guggenheim Securities downgraded PPL from “buy” to “neutral” on August 9, 2016.

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Duke Energy (DUK) has a median price target of $85.31—compared to its current market price of $85.00. This implies an estimated flattish movement in the next year. Xcel Energy (XEL) has an expected upside of nearly 3% in the next year. It has a price target of $44.42—compared to its current market price of $43.16. Southern Company (SO) is expected to be flattish next year with a price target of $53.44. Currently, it’s trading at $53.00.

Outlook

PPL management lowered its earnings growth forecast for 2017 in its 2Q16 earnings release considering the Brexit vote and related currency headwinds. Earlier, PPL’s earnings growth forecast was 6%. Now, it’s expecting a 9% drop in 2017 earnings per share. Currency devaluations associated with the Brexit vote might hurt PPL’s return on equity.

PPL is the only US regulated utility holding company that operates internationally. However, it doesn’t have commodity exposure like Duke Energy, Sempra (SRE), and AES Corporation (AES). This makes its earnings less volatile than its peers. Currently, it’s trading at a yield of 4.2%—one of the best among its peers. PPL’s lower beta of 0.4 also presents an interesting case of low risk and moderate returns. Beta measures the volatility of a stock compared to the market.

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