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We expect diversified utility company PPL Corporation (PPL - Analyst Report) to beat expectations when it reports first-quarter 2014 results on May 1, 2014.

Why a Likely Earnings Beat?

Our proven model shows that PPL Corp. is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Positive Zacks ESP: This is because the Most Accurate estimate stands at 71 cents while the Zacks Consensus Estimate is 68 cents, resulting in +4.41% ESP. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks #2 Rank (Buy): We note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered while going into an earnings announcement.

The combination of PPL Corp.’s Zacks Rank #2 (Buy) and +4.41% ESP make us confident of a positive earnings beat on May 1.

What is Driving Better-than-Expected Earnings?

PPL Corp. continues to expand its existing operations through construction of new assets. The company plans to spend a total of around $18.4 billion between 2014 and 2018 under construction projects. These initiatives will enable PPL Corp. to increase its scale of operations and deliver uninterrupted services.

In Nov 2013, the Virginia State Corporation Commission gave approval to PPL Corp.’s unit Kentucky Utilities Company to increase annual base electricity rates. The company’s projected regulated rate base growth is $130 billion within a period of 2014 and 2018. The approval of rate hike appeal from the commissions will supplement the company’s revenues.

We expect PPL Corp.’s upcoming first-quarter 2014 result to improve due to cold winter season in the U.S.

Other Stocks to Consider

Here are some other utility companies worth considering as our model shows they have the right combination of elements to post an earnings beat this quarter.

Exelon Corp. (EXC - Analyst Report) has an earnings ESP of +6.94% and carries a Zacks Rank #2 (Buy).

OGE Energy Corp. (OGE - Analyst Report) has an earnings ESP of +4.17% and carries a Zacks Rank #2 (Buy).

Public Service Enterprise Group Inc. (PEG - Analyst Report) has an earnings ESP of +7.61% and carries a Zacks Rank #2 (Buy).

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