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PPL vs. CMS: Which Utility Stock Offers Greater Upside Potential?
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Key Takeaways
PPL and CMS are investing heavily in grid upgrades and renewables to meet rising electricity demand.
CMS posts a higher ROE of 12.1% vs. PPL's 9.08%, outperforming the industry's 10.7% average.
PPL currently trades at 18.67X P/E-F12M, slightly above CMS at 18.59X valuation.
Stocks in the Zacks Utility-Electric Power industry offer an attractive investment opportunity, supported by stable cash flows and the predictability of regulated business models. Most domestic utilities operate under long-term power purchase agreements, which help shield revenues from economic volatility. Rising electricity demand, along with ongoing capital investments, is improving operational efficiency, allowing these companies to deliver consistent earnings and maintain reliable dividend payments.
The utility industry is accelerating its shift to cleaner energy as 24/7 power demand rises from AI-driven data centers, industrial reshoring and growing Electric Vehicle adoption. Utilities are retiring legacy fossil assets, expanding renewables and deploying low-emission technologies while preserving grid reliability. Supported by strong capital-return programs, the sector remains attractive to income investors and well-positioned for durable long-term value as decarbonization advances. The capital-intensive utilities will also benefit from the drop in the Fed interest rate to the range of 3.5-3.75%.
Amid such ongoing developments, let us focus on PPL Corporation (PPL - Free Report) and CMS Energy (CMS - Free Report) . Both are U.S.-regulated electric utility companies investing heavily in grid infrastructure, renewable energy integration and meeting rising demand.
PPL Corporation operates as a fully regulated utility, emphasizing infrastructure upgrades and clean energy investments that support stable cash flows and dependable dividends. Its predictable revenue base, supported by constructive regulation and a solid balance sheet, enables continued spending on grid modernization, renewables and decarbonization, positioning the company for steady earnings growth and long-term value creation.
CMS Energy will benefit from its capital investment plan, improving economic conditions in the service territories and a clear focus on clean energy. The company plans to modernize the grid, enhance reliability and expand capacity to meet rising demand from data centers and industrial activity in Michigan. A constructive regulatory framework enables timely cost recovery and steady rate base growth, supporting consistent earnings. CMS Energy is expanding its renewable portfolio with investments in solar, wind and energy storage, targeting net zero operations by 2040, while continuing to deliver stable dividends and long term shareholder value.
As demand for clean energy continues to accelerate, it is timely to examine the fundamentals of both companies to assess which offers the more compelling investment opportunity in 2026.
PPL & CMS’ Earnings Estimates
The Zacks Consensus Estimate for PPL’s earnings per share in 2026 has improved year over year by 7.6%. Long-term (three to five years) earnings growth per share is pegged at 7.34%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CMS’ earnings per share in 2026 has improved year over year by 7.28%. Long-term earnings growth per share is pegged at 7.31%.
Image Source: Zacks Investment Research
Return on Equity
Return on Equity (“ROE”) is an essential financial indicator that evaluates a company’s efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value.
PPL’s current ROE is 9.08% compared with CMS’ 12.1%. CMS also outperforms the industry’s ROE of 10.7%.
Image Source: Zacks Investment Research
Valuation
PPL Corporation currently appears to be trading at a tad premium compared with CMS Energy on a Price/Earnings Forward 12-month (P/E- F12M) basis.
CMS is currently trading at 18.59X, while PPL is trading at 18.67X compared with the industry’s 15.64X.
Image Source: Zacks Investment Research
PPL & CMS’ Capital Return Program
Dividends are recurring payments made by companies to their shareholders, offering a direct source of investment returns. These payouts typically indicate solid financial performance, marked by stable earnings and healthy cash flow. Utility companies are especially known for their dependable and consistent dividend distributions.
Currently, the dividend yield for PPL Corporation is 2.99%, while the same for CMS Energy is 3.03%. The dividend yield of both companies is presently better than the S&P 500 composite’s yield of 1.35%.
Debt to Capital & TIE Ratio
The debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows the amount of debt used to run a business. PPL and CMS have a debt-to-capital of 56.85% and 65.54%, respectively, compared with the industry’s 61.05%.
Currently, PPL's times interest earned (“TIE”) ratio is 2.7 and the same for CMS is 2.6. Both companies have maintained their TIE ratio at more than 1 for over a decade now. This indicates that the companies have enough financial flexibility to meet their near-term debt obligations.
Long-Term Capital Investment Plans
The Zacks Utility-Electric Power industry is a very capital-intensive industry and the companies operating in this industry need to make investments for maintenance, upgrade and expansion of their infrastructure to efficiently serve customers.
CMS plans to make capital expenditures worth $20 billion during 2025-2029. Out of this, the company will invest nearly $6.3 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions.
PPL expects a regulated capital investment plan of $20 billion during 2025-2028. The company aims to cut outages further, owing to the ongoing investments. It continues to make investments to strengthen the grid, electricity and gas distribution, electricity transmission and expand clean energy generation capacity.
Summing Up
PPL and CMS are making investments to strengthen their operations and efficiently serve customers.
Both companies currently have a Zacks Rank #3 (Buy) and are matched in most of the metrics discussed above. However, given CMS’ better ROE and cheaper valuation, it currently has an edge over PPL.
Image: Bigstock
PPL vs. CMS: Which Utility Stock Offers Greater Upside Potential?
Key Takeaways
Stocks in the Zacks Utility-Electric Power industry offer an attractive investment opportunity, supported by stable cash flows and the predictability of regulated business models. Most domestic utilities operate under long-term power purchase agreements, which help shield revenues from economic volatility. Rising electricity demand, along with ongoing capital investments, is improving operational efficiency, allowing these companies to deliver consistent earnings and maintain reliable dividend payments.
The utility industry is accelerating its shift to cleaner energy as 24/7 power demand rises from AI-driven data centers, industrial reshoring and growing Electric Vehicle adoption. Utilities are retiring legacy fossil assets, expanding renewables and deploying low-emission technologies while preserving grid reliability. Supported by strong capital-return programs, the sector remains attractive to income investors and well-positioned for durable long-term value as decarbonization advances. The capital-intensive utilities will also benefit from the drop in the Fed interest rate to the range of 3.5-3.75%.
Amid such ongoing developments, let us focus on PPL Corporation (PPL - Free Report) and CMS Energy (CMS - Free Report) . Both are U.S.-regulated electric utility companies investing heavily in grid infrastructure, renewable energy integration and meeting rising demand.
PPL Corporation operates as a fully regulated utility, emphasizing infrastructure upgrades and clean energy investments that support stable cash flows and dependable dividends. Its predictable revenue base, supported by constructive regulation and a solid balance sheet, enables continued spending on grid modernization, renewables and decarbonization, positioning the company for steady earnings growth and long-term value creation.
CMS Energy will benefit from its capital investment plan, improving economic conditions in the service territories and a clear focus on clean energy. The company plans to modernize the grid, enhance reliability and expand capacity to meet rising demand from data centers and industrial activity in Michigan. A constructive regulatory framework enables timely cost recovery and steady rate base growth, supporting consistent earnings. CMS Energy is expanding its renewable portfolio with investments in solar, wind and energy storage, targeting net zero operations by 2040, while continuing to deliver stable dividends and long term shareholder value.
As demand for clean energy continues to accelerate, it is timely to examine the fundamentals of both companies to assess which offers the more compelling investment opportunity in 2026.
PPL & CMS’ Earnings Estimates
The Zacks Consensus Estimate for PPL’s earnings per share in 2026 has improved year over year by 7.6%. Long-term (three to five years) earnings growth per share is pegged at 7.34%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CMS’ earnings per share in 2026 has improved year over year by 7.28%. Long-term earnings growth per share is pegged at 7.31%.
Image Source: Zacks Investment Research
Return on Equity
Return on Equity (“ROE”) is an essential financial indicator that evaluates a company’s efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value.
PPL’s current ROE is 9.08% compared with CMS’ 12.1%. CMS also outperforms the industry’s ROE of 10.7%.
Image Source: Zacks Investment Research
Valuation
PPL Corporation currently appears to be trading at a tad premium compared with CMS Energy on a Price/Earnings Forward 12-month (P/E- F12M) basis.
CMS is currently trading at 18.59X, while PPL is trading at 18.67X compared with the industry’s 15.64X.
Image Source: Zacks Investment Research
PPL & CMS’ Capital Return Program
Dividends are recurring payments made by companies to their shareholders, offering a direct source of investment returns. These payouts typically indicate solid financial performance, marked by stable earnings and healthy cash flow. Utility companies are especially known for their dependable and consistent dividend distributions.
Currently, the dividend yield for PPL Corporation is 2.99%, while the same for CMS Energy is 3.03%. The dividend yield of both companies is presently better than the S&P 500 composite’s yield of 1.35%.
Debt to Capital & TIE Ratio
The debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows the amount of debt used to run a business. PPL and CMS have a debt-to-capital of 56.85% and 65.54%, respectively, compared with the industry’s 61.05%.
Currently, PPL's times interest earned (“TIE”) ratio is 2.7 and the same for CMS is 2.6. Both companies have maintained their TIE ratio at more than 1 for over a decade now. This indicates that the companies have enough financial flexibility to meet their near-term debt obligations.
Long-Term Capital Investment Plans
The Zacks Utility-Electric Power industry is a very capital-intensive industry and the companies operating in this industry need to make investments for maintenance, upgrade and expansion of their infrastructure to efficiently serve customers.
CMS plans to make capital expenditures worth $20 billion during 2025-2029. Out of this, the company will invest nearly $6.3 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions.
PPL expects a regulated capital investment plan of $20 billion during 2025-2028. The company aims to cut outages further, owing to the ongoing investments. It continues to make investments to strengthen the grid, electricity and gas distribution, electricity transmission and expand clean energy generation capacity.
Summing Up
PPL and CMS are making investments to strengthen their operations and efficiently serve customers.
Both companies currently have a Zacks Rank #3 (Buy) and are matched in most of the metrics discussed above. However, given CMS’ better ROE and cheaper valuation, it currently has an edge over PPL.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.