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We reaffirm our Neutral recommendation on PPL Corporation (PPL - Analyst Report). The company currently has a short-term Zacks Rank #3 (Hold).

Why the Reiteration?

We view PPL Corporation as an organization with a well diversified asset portfolio and business model, which is adaptable to a wide range of market scenarios. This diverse generation mix positions the company to benefit from proposed Environmental Protection Agency regulations.

In addition, the company continues to focus on maintaining a strong credit profile and liquidity position. As of Sep 30, 2012, PPL Corporation had $946 million in cash and $4.6 billion available under its domestic credit facilities. This financial condition enables the company to follow steady inorganic growth strategy and deal with the after-effects of the Hurricane Sandy.

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

Effects of the negative factors, along with impacts of the Hurricane Sandy, have also been reflected on the Zacks Consensus Estimates. As per the Zacks Consensus Estimates, the company’s fourth-quarter and full-year 2012 earnings per share were 46 cents and $2.36, respectively, which were lower than the year-ago figures.

For full-year 2012, PPL Corporation increased its earnings guidance to the range of $2.30 - $2.40 per share from its earlier projection of $2.15 - $2.45 per share primarily due to strong performance from Western Power Distribution plc’s Midlands utilities division.

Other Stocks to Consider

Other stocks in the utility sector that are presently doing favorable business include Huaneng Power International, Inc. (HNP - Snapshot Report) and Pike Electric Corporation (PIKE - Snapshot Report). Both these companies currently carry a short-term Zacks Rank #1 (Strong Buy).

Allentown, Pennsylvania-based PPL Corporation generates and delivers electricity and natural gas to more than 10 million customers in the U.S. and UK.

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