Morningstar

PPL Earnings: Addition of Rhode Island Energy Aids Results Amid Unfavorable Weather

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Securities In This Article
PPL Corp
(PPL)

We are maintaining our $29 per share fair value estimate for PPL after the company reported first-quarter operating earnings of $0.48 per share, up from $0.41 in the same year-ago period. The company reaffirmed its $1.50-$1.65 EPS guidance range, in line with our expectations.

The company’s 6%-8% earnings outlook remains unchanged. We expect PPL to achieve the midpoint. We expect dividend growth to be in line with earnings growth, consistent with PPL’s 7% dividend increase for 2023. PPL now trades in line with our fair value estimate after climbing 8% from its March lows.

Similar to PPL’s peers, the switch from a colder-than-normal winter in 2022 to a substantially warmer-than-normal winter this year resulted in a $0.05 per share negative year-over-year impact. Near-term changes in electricity demand driven by weather volatility have no impact on our fair value estimate. The addition of Rhode Island Energy was the main contributor of the earnings increase.

The company continues to work on securing its $11.9 billion in capital investment plan through 2026, which supports our 7% earnings growth estimate. In Rhode Island, regulators approved $290 million of investments as part of the Infrastructure, Safety, and Reliability plans. This is down from PPL’s initial $352 million request.

In Kentucky, PPL continues to work with regulators to gain support for its $2.1 billion generation investment plan, which includes 1.5 gigawatts of coal generation retirements replaced by 1.2 GW of natural gas generation and 1 GW of solar and battery storage. However, state legislation put the early coal retirements plan at risk. If regulators choose environmental controls over renewable energy replacement, the utility would be able to recover the investments through its existing environmental cost recovery mechanism without regulatory approval. However, that decision could lower the utility’s growth capital investment and earnings.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Andrew Bischof, CFA

Strategist
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Andrew Bischof, CFA, CPA, is a strategist, AM Resources, for Morningstar*. He covers electric, gas and water utilities. He conducts comprehensive research and analysis on his covered companies to provide insights into investment opportunities. He assesses financial statements, competitive advantages, and economic indicators to determine a stock’s intrinsic value. He is a five-time Morningstar Outstanding Research Achievement award winner, which recognizes thought leadership and equity research quality as voted on by senior management.

Before joining Morningstar in 2011, Bischof worked in treasury for Mead Johnson Nutrition. Previously, He was a group audit officer for Bank of America in Chicago, and before that, an auditor for Ernst & Young.

Bischof holds a bachelor’s degree in business administration and accounting and a master’s degree in accounting from the University of Wisconsin. He also holds a master’s degree in business administration, with a concentration in finance, from Indiana University’s Kelley School of Business. Additionally, he holds the Chartered Financial Analyst® and Certified Public Accountant designations.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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