PPL Corporation (PPL) Down 4.6% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for PPL Corporation (NYSE:PPL) . Shares have lost about 4.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PPL due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

PPL Corp. U.S. Contribution Leads to Q1 Earnings Beat

PPL Corporation reported first-quarter 2018 adjusted earnings of 74 cents per share, beating the Zacks Consensus Estimate of 66 cents by 12.1%. Earnings also improved 19.4% year over year.

The year-over-year improvement in earnings is primarily due to strong performance from its domestic segments.

On a GAAP basis, the company reported earnings per share of 65 cents in the quarter compared with 59 cents a year ago. The difference between GAAP and operating earnings in the reported quarter was due to one-time impact of 9 cents from foreign currency hedges.

Total Revenues

PPL Corp. posted revenues of $2,126 million in the first quarter, beating the Zacks Consensus Estimate of $1,983 million by 7.2%. Revenues also improved 8.9% year over year.

Segment Results

U.K. Regulated: Adjusted earnings decreased 17.8% from the prior-year quarter to 37 cents per share. The decline was primarily due to lower volumes and impact from share dilution.

Kentucky Regulated: Adjusted earnings were 19 cents, up 35.7% from the year-ago quarter, primarily driven by higher base electricity and gas rates effective Jul 1, 2017 and rise in sales volumes due to favorable weather.

Pennsylvania Regulated: Adjusted earnings in the quarter were 21 cents, up 75.0% from the year-ago quarter. The year-over-year improvement was due to higher transmission earnings due to additional capital investments.

Corporate and Other: It includes unallocated corporate-level financing and other costs. The segment reported a loss of 3 cents in the quarter compared with a loss of 9 cents in the prior-year quarter.

Operational Highlights

PPL Corp.’s total operating expenses increased 6.9% year over year to $ 1,275 million in the reported quarter.

The company reported operating income of $851 million, up 12.3% from the prior-year quarter.

Interest expenses increased 10.1% to $239 million compared with the year-ago quarter’s figure of $217 million.

Financial Position

As of Mar 31, 2018, PPL Corp. had cash and cash equivalents of $629 million compared with $485 million as of Dec 31, 2017.

Long-term debt (excluding debts due within one year) was $20,214 million as of Mar 31, 2018, compared with $19,847 million at the end of 2017.

In the first quarter of 2018, net cash flow from operating activities was $566 million compared with $135 million in the first quarter of 2017.

Guidance

PPL Corp. reaffirmed its 2018 adjusted earnings to be in the range of $2.20-$2.40 per share. The company also provided compound earnings growth guidance of 5-6% from 2018 through 2020, with 2018 midpoint as the base.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

PPL Corporation Price and Consensus

VGM Scores

At this time, PPL has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Following the exact same course, the stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, PPL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.