PPL Corp

US mid-size regulated utilities outperformed their bigger counterparts in the past year. Their rally was much steeper—this boosted total returns.

Exelon Corporation (EXC) reported a net income of $440 million in its 2Q14 earnings. The quarterly net income was $14 million lower year-over-year (or YoY).

PPL’s (PPL) management expects fair annual earnings growth of 5%-6% through 2020, which will likely facilitate its dividend growth.

In 4Q15, AES Corporation is expected to report earnings of $0.33 per share in 4Q15—compared to earnings of $0.41 per share in 4Q14.

PPL projects earnings growth of 6%–8% annually for US utilities for the next few years, while its UK segment’s earnings are expected to be driven by the movement of the British pound.

Currently, utilities are trading at a PE (price-to-earnings) multiple of 13x—compared to their historical average valuation of ~14x–15x.

According to analysts’ consensus, PPL (PPL) stock offers a handsome potential upside of ~22% in a year with a mean target price of $33.5.

Investors may prefer to remain safe during turbulent times and could turn to utilities as Brexit becomes a reality.

Although utilities’ total returns were dominated mostly by stock appreciation this year, stable and increasing dividends were also an important factor.

US utility stocks slipped 0.8% on May 15 after ten-year Treasury yields peaked at 3.1%—a seven-year high. Broader markets also corrected 0.7%.

Duke Energy (DUK) has corrected more than 12% since July 2016. The Utilities Select Sector SPDR (XLU) has also witnessed similar weakness during this period.

Investment-grade bond issuance fell to $26.275 billion last week as compared to $32.35 billion in the previous week.

The struggling European utilities sector encountered another obstacle in the form of Brexit. Upcoming policy changes will pave the way for them in the future.

The slow-and-steady utilities sector was the top performer yesterday when the broader markets fell 3%.

PPL’s adjusted return on equity usually stays above its US regulated utility peers’ average. It earns higher ROE from its United Kingdom regulated segment.

For 1Q14, Anixter’s results beat on earnings, but missed on revenue.

Utility stocks seem overvalued. Utilities have reached record levels. They have been trading at inflated valuations for months.

Analysts expect AES (AES) to report earnings of $0.16 per share in 2Q16. In the same quarter last year, it reported earnings of $0.25 per share.

PPL (PPL), the top-yielding stock among the S&P 500 Utilities, has underperformed its peers in terms of total returns in 2018.

According to Wall Street analysts, AES has an estimated upside of 6.5% for the next year with a price target of $12.83. Currently, it’s trading at $12.

The power utilities sector remained under stress last week. The representative of the sector, the Utilities Select Sector SPDR (XLU), dropped by 4.1%.

The Illinois Basin produced ~120 million tons of coal during the 12 months ending September 13, 2014. This was ~65% of the interior region’s total production of 185 million tons during the same period. With estimates reserves of ~50 billion tons, the basin ranks second only to the gigantic PRB.

The consensus Wall Street analyst price target for PPL (PPL) is $36.47. Its current market price is $34.38, implying a rise of 6.1% over the next year.

A spinoff? As we discussed in the earlier part of this series, National Fuel Gas’ (NFG) GAMCO believes a standalone utility company can participate in industry consolidation GAMCO Investors proposed in its filing, “We believe that a spin-off of NFG’s local distribution utility segment into a separately traded public company, thus creating two C-corporations (a […]

Utility stocks have been rallying for the last two years amid broader market volatility. The rally in these stocks steepened last year.

Recession fears have been hovering over the market throughout this year. However, defensives such as utilities are trading at record highs.

Utility stocks have been some of the strongest equities this year. The stocks are up approximately 20% this year, in line with the Dow Jones.

Generally, investors prefer utility stocks due to their stable dividend-paying capabilities. Currently, they offer an average dividend yield of 3%.

With the exception of Texas, wholesale prices in all other US regions were low.

First Energy operates in six northeastern U.S. states. This translates to a service territory of 65,000 square miles. These states are allowed deregulation of electricity, but First Energy’s T&D network remains regulated.

Forward multiples are a useful metric for gauging relative valuation. A higher multiple usually indicates a richer valuation for a company.

Among the top utilities, Southern Company’s 4.2% dividend yield beats the peer average of 3%. However, PPL’s yield is 5.6% and Dominion Energy yields 4.8%.

The unusual rally in utility stocks has pushed them to record valuation multiples this year. On average, they’re currently trading at 19 times their forward earnings!

The utilities sector continues to offer a premium dividend yield along with stable upward price movement. On average, utility stocks are currently yielding 3.2%, while broader markets offer a yield close to ~2%.

Utility stocks (XLU) are currently trading at a dividend yield of 3.1%, higher than broader markets.

Currently, utilities (XLU) offer a yield of 3.3%, which implies a spread of almost 50 basis points to the benchmark ten-year Treasury yield.

Last week, utilities started on a weak note. The Utilities Select Sector SPDR ETF (XLU) fell marginally, while the S&P 500 rose almost 3%.

In this series, we’ll look PPL (PPL), the highest-yielding utility stock.

Slow and stable utility stocks have outperformed broader markets so far this year.

In this series, we’ll look at the S&P 500 Utilities stocks that have generated the highest total returns over the past five years.

Exelon’s (EXC) EV-to-EBITDA (enterprise value-to-EBITDA) multiple is 7.57x.

PPL Corporation (PPL) stock has rallied more than 11% in the last month, outperforming utilities at large.

PPL (PPL) stock offers an attractive potential upside of more than 13% in a year with a mean target price of $32.3. PPL stock is trading at $28.5.

PPL Corporation (PPL) stock has returned -21% in the last year. The underperformance was largely due to its stock falling in the last few months.

PPL’s dividend yield rose significantly—mainly because of its steep stock fall. It’s currently trading at a dividend yield of 6%, compared to its peers’ (XLU)(IDU) average yield of 4.3%.

PPL Corporation (PPL) stock was particularly hit by the recent utilities turmoil. Its valuation fell significantly over the last few months.

According to Wall Street analysts’ consensus, PPL (PPL) stock offers attractive potential upside of more than 16% in a year with a mean target price of $32.4. Currently, PPL stock is trading at $27.9.

Pennsylvania-based PPL Corporation (PPL) stock fell more than 20% in the last three months.

US utility stocks have corrected roughly 11% in the last three months since the last rate hike in December 2017.

On March 7, 2018, PPL’s (PPL) implied volatility reached almost 30%—notably higher than its 15-day average.

The Vanguard Group holds more than 7% of PPL’s (PPL) total outstanding shares, according to its latest filing on March 31, 2017.

PPL Corporation’s (PPL) projected 5% annual rate base growth is expected to drive its EPS growth in the next few years.

PPL’s dividend yield is among the highest in the sector. Top utilities such as Duke Energy and Southern Company are also currently trading at respective yields of ~4.5%.

PPL has corrected more than 13% in 2H16. On November 23, PPL was trading at an enterprise value to earnings before interest, tax, depreciation, and amortization multiple of 10.2x.

Duke Energy’s (DUK) adjusted return on equity stayed below 8% due to volatile earnings from international operations. This ROE was on the lower side of the industry average.

The consensus Wall Street analyst price target for Duke Energy (DUK) is $82.38. Its current market price is $77.82, implying a rise of 6% over the next year.

PPL (PPL) corrected 1.0% after it released its third-quarter earnings on November 1, 2016. The Utilities Select Sector SPDR ETF (XLU) corrected nearly 2.0% that day.

NRG Energy (NRG) has the highest implied volatility of all the utility companies that make up the Utilities Select Sector SPDR ETF (XLU).

Duke Energy corrected more than 10% since July 2016. It’s trading at an EV-to-EBITDA multiple of 10.4x—slightly overvalued compared to the industry average.

PPL Corporation’s (PPL) stock witnessed severe pressure after the Brexit vote.

PPL has huge exposure to UK operations, as it derives more than 65% of its total earnings.

Investors may overlook PPL Corporation (PPL) despite being relatively cheaper than its peers. The Brexit vote may negatively impact its cash flows due to its significant operations in the UK.

AES’s (AES) dividend yield has improved significantly in the last couple of years. The 10% fall in dividends in 2016 is among one of the highest in the industry.

According to a recent report, short interest in Southern Company has risen 1.4% as of September 15, 2016.

Institutional investors raised their stake in the Utilities Select Sector SPDR ETF (XLU) in the last couple of months.

According to the EIA’s Short-Term Energy Outlook for August 2016, retail electricity sales to the residential sector during June–August 2016 will be 3% higher compared to the same period in 2015.

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.

Duke Energy (DUK) continued to see flattish retail load growth in the second quarter of 2016.

Duke Energy (DUK) posted its 2Q16 earnings on August 4, 2016. It reported 13% rise in its earnings year-over-year and earned $1.07 per share in the reported quarter.

Duke Energy is expected to keep up its sales growth largely by expanding its customer base. Every 1% rise in sales growth can be translated to 2% EPS growth.

According to Richard Bernstein, cyclical stocks tend to do better than stable growth companies in earnings-driven bull markets.

The EIA forecast that electricity demand will likely grow in the long term, but the growth rate will stay lower. It slowed continuously over the last 60 years.

AES Corporation’s management forecasts that its cash flow will grow significantly in 2016—enough to support its projected annual dividend increase of 10%.

During mid-May 2016, short interest in PPL decreased, likely reflecting a bullish sentiment of investors in the short term.

To combat currency headwinds, PPL has hedged 93% of this in the current year, 89% in 2017, and 41% of 2018.

At the end of the first quarter of 2016, PPL’s total debt stood at $19.8 billion. Of this amount, $18 billion was long-term debt.

PPL Corporation (PPL) is targeting 6.3% annual earnings growth in 2016, which is on the high side of the industry average.

PPL Corporation (PPL) turned into a pure-play regulated utility in 2015 and draws more than 60% of its consolidated earnings from operations in the UK.

In an interview with CNBC’s Michael Santoli, Richard Bernstein noted that the US corporate universe has been in a profit recession for three or four quarters.

American Electric Power’s (AEP) Vertically Integrated Utilities segment plays a key role in driving its performance, accounting for more than half of its total operating income.

Sempra provided flat to negative earnings guidance for 2016 based on its LNG terminal development and the weak outlook from its international segment.

NextEra Energy has posted nearly flat revenues in the last eight years. It derives over 70% of its total revenues from its regulated business operations.

PPL segregated its unregulated business from its regulated business in 2015. The strategic move may have a positive impact on the company’s earnings.

Public Service Enterprise Group (PEG) is one of the largest and oldest utilities in North America. Its aging infrastructure has become a serious obstacle in its growth over the last couple of years.

Debt profile PPL (PPL) is looking to strengthen its regulated business by investing $18 billion in the next five years. This funding will mainly be done by long-term debt financing. As of September 30, 2015, the company has total debt of $19.7 billion against equity of $10.2 billion. Of this total debt, $17.7 billion is long-term debt. […]

PPL is concentrated in the UK. It manages utility operations through PPL Global, PPL Electric, Louisville Gas and Electric, and Kentucky Utilities.

In the last few years, Exelon’s (EXC) long-term borrowing has increased and pushed leverage upwards.

American Electric Power has a geographically diversified market combination, with a major chunk of its revenue coming from its homeland Ohio.

Demand growth for electricity in the last decade has been sluggish due to increasingly energy-efficient devices and equipment.

Exelon (EXC) is a dominant energy player in the US that operates in energy generation, transmission, and delivery.

The six-month beta of the stocks of AES, PPL, Public Service Enterprise, and Entergy was less than one. Meanwhile, NRG Energy’s six-month beta was around one.

Last week was crucial for utilities stocks, as the Federal Reserve Open Market Committee met to chart the path of monetary policy.

Despite the neutral inventory report, natural gas prices fell marginally during the week ended March 6. The Henry Hub benchmark price dropped.

The Illinois Basin covers most of Illinois and parts of Ohio and western Kentucky. The region produces bituminous coal with a heat value ranging from 10,000–12,500 British thermal units per pound.

National Fuel Gas (NFG), which is seeing activism from GAMCO Investors, noted in its latest fiscal 3Q14 results that its earnings growth was driven by higher earnings in the Midstream and Upstream businesses.

The electric utilities industry is important for the economy because all businesses require electricity to operate. The EIA predicts that electricity demand in the U.S. will increase by 29% from 2012 to 2040. It will require more electricity to be generated.

The industry’s supply chain consists of three broad categories—generation, transmission, and distribution. Power generation requires a fuel source—for example, coal, nuclear, natural gas, or wind—and a power plant to convert the fuel source into electricity.