On Friday, PPL Corp (NYSE:PPL) was upgraded from Hold to Buy by a leading research firm, with a new price target set at $30.00. The upgrade reflects the utility company's initiatives to enhance infrastructure, reliability, and grow its rate base.
PPL Corp, a regulated gas and electric utility, serves customers across Pennsylvania, Kentucky, Virginia, and Rhode Island. The company's strategic acquisition of Narragansett Electric from National Grid (LON:NG) in May 2022 for $3.8 billion is progressing smoothly, with completion expected by mid-2024.
The firm has recognized PPL's cost-cutting measures and anticipates that earnings will be bolstered by the expansion of the rate base. In 2023, PPL received regulatory approvals for grid improvements in Rhode Island and a $2 billion generation investment in Kentucky, which are expected to drive earnings through at least 2026.
While performance has varied across states, with stronger results in Pennsylvania, the firm foresees a continued economic upturn in Kentucky. The anticipated growth in the return on equity (ROE) from capital investments is expected to compensate for slower population growth in the region.
PPL is projected to maintain substantial capital improvements as it transitions away from coal generation, particularly within its Kentucky operations. The stock is noted for its low beta, with returns historically driven by dividend growth.
The company has demonstrated a commitment to increasing its dividend, outpacing its peers with a 7.3% dividend increase in early March 2024. This follows a 6.6% increase in March 2023 and a 12% hike in June 2022. Management's guidance suggests a 6%-8% earnings growth through 2027, which the firm believes is achievable at least until the end of 2025.
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