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PPL Corp (PPL) to Benefit From Systematic Capital Expenditure

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PPL Corporation’s (PPL - Free Report) ongoing capital investments to strengthen infrastructure and recovery of 80% of the same in a year, growth in domestic operation as well as hedging programs bode well for its earnings in the upcoming days.

For 2019, earnings estimates inched up 0.4% to $2.43 per share in the past 90 days. Additionally, the company posted an average positive earnings surprise of 1.4% in the last four quarters.

In the past 12 months, shares of the company have returned 12.1% compared with the industry’s growth of 8.4%.

What’s Driving the Stock?

PPL Corp’s capital investment plan primarily focuses on infrastructure projects for generation, transmission and distribution. The company is on track to invest $3.3 billion in infrastructure improvements in 2019 and plans to spend nearly $15 billion through 2019-2023. Based on systematic investments and timely recovery, the company expects to achieve compound annual earnings growth of 5-6% through 2020 from midpoint of initial 2018 earnings guidance of $2.30 per share.

The company’s asset portfolio and business model are adaptable to various market scenarios. PPL Corp continues to follow an organic growth strategy to expand as well as upgrade its electric and gas infrastructure. PPL Electric Utilities is about to complete a multi-year advanced meter replacement project in Pennsylvania, which is valued at $470 million. These meters will enable the company to respond more efficiently to customer requests by remotely connecting and disconnecting service.

The company has a history of dividend payouts. In August 2019, the company declared a quarterly common stock dividend of 41.25 cents per share, which was paid out on Oct 1, 2019. This represents the company’s 295th consecutive quarterly dividend. The strong cash flow generation capacity enables the company to payout consistent dividend to shareholders.

However, higher debt levels, unplanned outages at power plants as well as stringent law and regulations outside the United States are headwinds for PPL Corp.

Zacks Rank

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks from the same industry are Eversource Energy ES, FirstEnergy Corporation FE and Edison International EIX. All the three stocks hold a Zacks Rank #2 (Buy).

Long-term earnings growth of Eversource, FirstEnergy and Edison International is pegged at 5.6%, 6% and 5.27%, respectively.

Eversource, FirstEnergy and Edison International delivered an average positive earnings surprise of 2.39%, 2.87% and 0.09% in the last four quarters, respectively.

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