PPL Trades Above 50 & 200-Day SMAs: How to Play the Stock?

PPL Corporation (PPL) is trading above its 50 and 200-day simple moving averages (SMAs), signaling a bullish trend. The firm has repositioned itself as a U.S.-focused energy company after the divestiture of the international operation. Data centers are creating fresh demand in its service region.

PPL has a well-defined long-term capital investment strategy aimed at strengthening and expanding its infrastructure to ensure the delivery of safe, reliable and affordable energy. The company’s ongoing cost-saving initiatives are expected to enhance its profit margins.

PPL 50 and 200 Day SMAs

The 50 and 200-day SMAs are key indicators for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of a stock’s uptrend or downtrend.

In the past year, the company’s shares have gained 17.3% compared with the Zacks Utility- Electric Power industry’s 11.6% rise. PPL has outperformed the S&P 500’s growth of 16% and the Zacks Utilities sector’s rise of 9.6%.

Another utility in the same space, Dominion Energy (D), having substantial clean energy generation capability, has gained 3.2% in the past 12 months.

Price Performance (1 year)

Should you consider adding PPL to your portfolio only based on positive price movements? Let us delve deeper and find out the factors that can help investors decide whether it is a good entry point to add PPL stock to their portfolios.

Factors Acting as Tailwinds for PPL Stock

PPL Corporation’s capital investment strategy is primarily centered on infrastructure development projects across generation, transmission and distribution. Thanks to these ongoing investments in system reliability, customers have been experiencing fewer outages. The company plans to invest $20 billion between 2025 and 2028 to enhance operations further and maintain the delivery of high-quality service to its customers.

In the 2025-2028 time period, PPL plans to invest $8 billion in electric and gas distribution investments to improve the quality of services and $6 billion in electric transmission investments to strengthen the reliability and resiliency of the electricity grid. PPL is using smart grid technology to provide better services and efficiently cater to the increasing demand coming from its expanding customer base.

More than 60% of PPL’s capital investment plan is subject to “contemporaneous recovery,” which reduces the impact of regulatory lag on earnings for investments. The recovery of capital expenditures quickly allows the company to fund long-term projects easily.

PPL is also working to reduce its operating and maintenance (O&M) costs by at least $150 million by 2025 and $175 million by 2026. In 2024, PPL achieved $130 million in savings from the 2021 baseline.

PPL’s Pennsylvania and Kentucky service regions continue to attract data centers’ interest. These data centers are creating demand for PPL services and will continue to generate demand in the future, as well as boosting its performance. New data center requests have increased in Pennsylvania and Kentucky to 50 gigawatts (“GW”) and 8.5 GW over the 2026-2034 period, respectively.

PPL’s Earnings Estimates Moving North

PPL Corporation expects its 2025 earnings per share in the range of $1.75-$1.87. The Zacks Consensus Estimate for PPL’s 2025 and 2026 earnings per share indicates an increase of 2.2% and 2.04%, respectively, in the past 60 days.

The Zacks Consensus Estimate for Dominion Energy’s 2025 earnings per share remained unchanged in the past 60 days, while the earnings estimate for 2026 has increased 0.28% in the same time period.

PPL Increases Value of Its Shareholders

The company has been distributing dividends to its shareholders for a long time and plans to increase dividends annually in the range of 6-8% at least through 2028, subject to the board’s approval. The company’s current quarterly dividend rate is 27.25 cents, resulting in an annual dividend of $1.09 per share. The current dividend yield is 2.88% better than the S&P 500 group’s yield of 1.48%.

PPL has raised dividends for its shareholders four times in the past five years. Check PPL’s dividend history here.

Duke Energy (DUK), operating in the same space, has been investing regularly to provide high-quality services to its customers. The company also distributes dividends to its shareholders. The current annual dividend rate of Duke Energy is $4.26 per share, reflecting a dividend yield of 3.33%.

PPL Stock Returns Lower Than the Industry

PPL’s trailing 12-month return on equity (“ROE”) of 8.81% is lower than the industry average of 10.35%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.

Duke Energy’s current ROE is 9.85%, lower than its industry.

PPL Stock Trades at a Premium

PPL Corporation is currently valued at a premium compared with its industry on a forward 12-month P/E basis. The stock is trading at P/E F12M of 19.3X compared with its industry’s 15.65X.

Wrapping Up

PPL is well-positioned to benefit from growing energy demand across service areas, while its cost-saving initiatives are expected to continue supporting margin expansion. Additionally, the company’s ability to recover more than 60% of its capital expenditures in real time provides flexibility to efficiently fund long-term projects.

However, PPL’s shares currently trade at a premium and its returns remain slightly below the industry average. So, the new investors should wait for a better entry point to add this Zacks Rank #3 (Hold) stock to their portfolio.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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This article originally published on Zacks Investment Research (zacks.com).

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