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PPL Corp. Misses on Earnings, Beats Revs

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PPL Corporation (PPL - Free Report) reported third-quarter 2013 pro forma earnings per share of 66 cents, missing the Zacks Consensus Estimate by 3 cents. Quarterly earnings decreased by 8% year over year due to weak results from the company’s Supply and Corporate and Other segments. However, these negatives were partially offset by improved performance from the Kentucky Regulated, U.K. Regulated and Pennsylvania Regulated segments.

The company’s GAAP earnings were 62 cents versus 61 cents a year ago. The difference of 4 cents between GAAP and pro forma earnings was due to a penny charge for the adjusted energy-related economic activity, a charge of 13 cents for the foreign currency-related economic hedges and another 3 cents charges related to change in WPD line loss accrual; partially offset by a gain of 13 cents related to changes in the U.K. tax rate.

PPL Corporation posted total operating revenues of $3.1 billion, beating the Zacks Consensus Estimate by $0.3 billion. Revenues surged 29.2% year over year on the back of an increase in utility and unregulated retail electricity and gas sales.

Operational Update

In the quarter under review, total operating expenses were $2.2 billion, up 29.3% year over year mainly due to a rise in depreciation expenses and higher costs on energy-related businesses.

Increase in operating revenues more than offset rise in total operating expenses, thereby resulting in an operating income of $0.9 billion, up 29.1% year over year.

PPL Corporation delivered 17,436 Gigawatt hours (GWh) domestic retail electricity, down 3.2% year over year.

The company supplied 11,762 GWh domestic retail electricity, up 0.1% year over year due to a rise in sales at PPL EnergyPlus.

Internationally, the company’s volume of electricity delivery decreased 0.3% year over year to 17,494 GWh.

In the domestic wholesale business, the company’s sales dropped 10.7% year over year to 15,398 GWh.

Financial Update

As of Sep 30, 2013, PPL Corporation had cash and cash equivalents of $1.3 billion versus $0.9 billion as of Dec 31, 2012.

Long-term debt (noncurrent) as of Sep 30, 2013 was $19.1 billion compared with $18.7 billion at the end of 2012.

Net cash provided by operating activities during the first nine months of 2013 was $2.2 billion compared with $2.1 billion in the prior-year comparable period.

During the first nine months of 2013, the company’s capital expenditure increased 33.2% year over year to $2.8 billion.


PPL Corporation increased its full-year 2013 pro forma earnings guidance in the range of $2.30 to $2.40 per share from the prior projection of $2.25 to 2.40 per share. The company increased its guidance primarily due to strong performance from its regulated business segments.

Other Company Releases

American Electric Power Company Inc. (AEP - Free Report) reported third-quarter operating earnings of $1.10 per share, beating the Zacks Consensus Estimate of $1.08 by 1.9%.

CMS Energy Corp. (CMS - Free Report) announced third-quarter 2013 adjusted earnings per share of 46 cents, missing the Zacks Consensus Estimate by a penny.

Entergy Corp. (ETR - Free Report) posted operational earnings of $2.41 per share, surpassing the Zacks Consensus Estimate of $2.29 by 5.2%.

Our View

Though PPL Corporation reported positive earnings surprises in 4 out of last 6 quarters, the company failed to beat the estimate mainly due to an increase in shares outstanding.

We appreciate PPL Corporation’s steady effort towards upgrading its renewable as well as traditional electricity transmission and distribution infrastructure, on the back of stable financial position. These initiatives will provide uninterrupted service to its customers, thereby subsequently improving its performance going forward.

However, stringent regulations and risks associated with delay and cancellation of projects, may to some extent, limit the company’s future results. The company currently has a Zacks Rank #3 (Hold).

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