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We have maintained our Neutral recommendation on a utility provider PPL Corporation (PPL - Analyst Report). The company currently has a Zacks Rank #3 (Hold).

Why the Reiteration?

In the first quarter of 2013, PPL Corporation’s earnings per share were in line with the Zacks Consensus Estimate and surpassed the year-ago level primarily due to strong performance from the Kentucky Regulated, U.K. Regulated and Pennsylvania Regulated segments.

PPL Corporation has strong financial position with cash balance of $853 million as of Mar 31, 2013 and availability of $4.7 billion under the total domestic credit facilities. This profile enables the company to follow steady organic and inorganic growth strategies.

As far as organic ventures are concerned, PPL Corporation’s unit PPL Electric Utilities intends to invest around $1 billion to upgrade its transmission and distribution systems as announced in Feb 2013. This initiative will help the company to provide uninterrupted services to its customers. In addition, the company also has a strong project pipeline, including ventures to minimize duration and size of outages.

On the inorganic front, PPL Corporation recently completed a number of acquisitions, including AES Ironwood, L.L.C and AES Prescott, L.L.C. These acquisitions, which are providing the company an operational control of additional combined-cycle gas generation, will subsequently improve its position by expanding the proportionate size of the regulated business.

However, we are concerned about the risks associated with the delay and cancellation of several important projects, and impacts of stringent regulations, which may to some extent, impede the company’s future growth.

Other Stocks to Consider

The other stocks in the industry that are worth considering include CPFL Energia S.A. (CPL - Snapshot Report) and Companhia Paranaense de Energia (ELP - Analyst Report) with a Zacks Rank #1 (Strong Buy), and ALLETE, Inc. (ALE - Snapshot Report) with a Zacks Rank #2 (Buy).

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