Is PPL Outperforming the Utilities Sector?

PPL Corporation (PPL), headquartered in Allentown, Pennsylvania, provides electricity and natural gas to approximately 3.6 million customers. Valued at $26.6 billion by market cap, the company generates electricity from power plants, as well as markets wholesale and retail energy and natural gas. It also delivers natural gas to customers in Kentucky and Rhode Island and generates electricity from power plants in Kentucky.

Companies worth $10 billion or more are generally described as “large-cap stocks.” PPL effortlessly fits that bill, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the utilities – regulated electric industry. PPL’s strengths include its stable, regulated business model, providing predictable revenue and reasonable returns, along with a diversified presence. Its resilient segments, including regulated electricity and gas distribution operations in Kentucky and large customer bases in Pennsylvania and Rhode Island, contribute to financial stability.

Despite its notable strength, PPL slipped 5.1% from its 52-week high of $37.38, achieved on Aug. 20. Over the past three months, PPL stock has gained 5.4%, outperforming the Utilities Select Sector SPDR Fund’s (XLU) 3.9% gains during the same time frame.

In the longer term, shares of PPL rose 9.3% on a YTD basis, underperforming XLU’s YTD gains of 11.2%. However, the stock climbed 8.6% over the past 52 weeks, outperforming XLU’s 6.3% returns over the last year.

To confirm the bullish trend, PPL has been trading above its 200-day moving average over the past year, with slight fluctuations. However, the stock has been trading below its 50-day moving average since early September, experiencing minor fluctuations.

PPL’s outperformance is driven by digital transformation and automation, leveraging advanced technologies such as smart grids, predictive analytics, and automated switches to enhance reliability, efficiency, and the customer experience. The company’s infrastructure investments, including a “Self-Healing Grid” and robust engineering specifications, strengthen its service resilience and support growing demand, particularly from data centers, with significant potential investments in Pennsylvania and Kentucky.

On Jul. 31, PPL shares closed down by 1% after reporting its Q2 results. Its adjusted EPS of $0.32 missed Wall Street expectations of $0.37. The company’s revenue was $2.03 billion, topping Wall Street forecasts of $1.98 billion. PPL expects full-year adjusted EPS in the range of $1.75 to $1.87.

In the competitive arena of utilities – regulated electric, Eversource Energy (ES) has taken the lead over PPL, showing resilience with a 10.4% uptick on a YTD basis, but lagged behind the stock with 7.3% losses over the past 52 weeks.

Wall Street analysts are reasonably bullish on PPL’s prospects. The stock has a consensus “Moderate Buy” rating from the 14 analysts covering it, and the mean price target of $38.69 suggests a potential upside of 9% from current price levels.

On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com