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PPL’s Q3 Revenues Missed Estimates: Favorable Weather Helped

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Nov. 2 2016, Published 11:20 a.m. ET

PPL missed revenue estimates

PPL (PPL) reported its fiscal 3Q16 financial earnings on November 1, 2016. It reported total revenues of $1.89 billion in 3Q16 against $1.88 billion in the same quarter last year. Analysts were expecting PPL to report revenues of $1.97 million for the quarter.

PPL has missed analysts’ revenue estimates for the last five quarters. Weather played an important role in driving 3Q16 revenues.

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Revenue drivers

More than half of PPL’s business comes from its UK operations, while the rest comes from Kentucky and Pennsylvania. Favorable weather in both states positively impacted PPL’s third-quarter top line. Total electricity sales to residential customers in Kentucky and Pennsylvania were 12.0% and 9.0% higher, respectively, than the same quarter last year.

Residential customers, which form a major chunk of PPL’s revenue, paid 0.70% less for electricity in the first half of 2016. The trend continued in the third quarter since electricity prices were marginally lower than 3Q15. This may negatively affect the top lines of utilities (XLU). However, a modest rise in natural gas prices in the second half of 2016 could raise electricity prices later this year.

PPL’s concerning UK exposure

The United Kingdom accounts for 42.0% of PPL’s total rate base. PPL serves more than 8.0 million customers there. More than 60.0% of its earnings come from the United Kingdom.

Duke Energy (DUK), PPL (PPL), AES (AES), and Sempra Energy (SRE) are other investor-owned US utilities that are expected to suffer due to their significant international presence. The Brexit is likely to weaken the British pound against the US dollar, which will hamper PPL’s earnings.

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