PPL vs. XEL: Which Utility Stock Looks Stronger for the Year Ahead?

The U.S. utility sector is going through a phase of rapid transformation as electricity demand rebounds after a prolonged period of stability. Rising power needs from data centers, AI-driven computing, electrified transport and heating, and renewed domestic manufacturing are reshaping consumption patterns. As a result, utilities are increasing investment in power generation, transmission networks and grid upgrades to ensure a reliable, continuous supply and support sustained long-term growth.

Utilities are accelerating the shift to cleaner power by phasing out coal and increasing investments in wind, solar, nuclear and energy storage. Backed by federal incentives and state decarbonization goals, this transition is driving capital toward long-lived, regulated assets that deliver steady returns while lowering emissions and supporting sustainable, long-term growth. The drop in interest rate to a range of 3.5% to 3.75% will act in favor of these capital-intensive companies.

Amid such ongoing developments, let us focus on PPL Corporation PPL and Xcel Energy XEL. 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.

Xcel Energy’s investment case is supported by strong capital spending, a clear clean-energy strategy and rising customer demand. The company is investing heavily in grid upgrades and modern generation to enhance reliability and support growth. Its leadership in decarbonization, with expanding wind, solar and storage assets backed by supportive regulation, improves long-term efficiency. Growing electrification across transportation and technology is driving customer additions, supporting steady earnings and long-term value creation.

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.

Movement in Earnings Estimates

The Zacks Consensus Estimate for PPL’s 2025 and 2026 earnings per share (EPS) indicates a year-over-year increase of 7.1% and 7.85%, respectively.  Long-term (three to five years) earnings growth is currently pegged at 7.34%.

The Zacks Consensus Estimate for XEL’s 2025 and 2026 EPS indicates a year-over-year increase of 9.1% and 7.98%, respectively.  Long-term earnings growth is currently pegged at 8.88%.

Return on Equity

Return on Equity (“ROE”) measures how effectively a company generates profits from shareholders' invested capital. PPL’s current ROE is 9.08% compared with Xcel Energy’s 10.45%

PPL & XEL’s Dividend Yield

Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for PPL is 3.11% compared with the Zacks Utility- Electric Power yield of 2.84%, and the same for Xcel Energy is 3.06%.

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 Xcel Energy have a debt-to-capital of 56.85% and 61.17%, respectively, compared with the industry’s 61.13%.

Currently, PPL's times interest earned (TIE) ratio is 2.7 and the same for XEL is 2.1. 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.

Valuation

PPL Corporation currently appears to be trading at a slight premium compared with Xcel Energy on a Price/Earnings Forward 12-month basis. (P/E- F12M).

PPL is currently trading at 18.01X, while XEL is trading at 17.99X and the Zacks Utility - Electric Power industry is trading at 15.3X.

Long-Term Strategic Investment Plans

PPL expects a regulated capital investment plan of $20 billion during 2025-2028. The capital investment for 2025 and 2026 is expected to be $4.3 billion and $5.2 billion, respectively. PPL’s Pennsylvania segment has nearly 20.5 GW of potential data center demand in the advanced stages, representing a potential transmission capital investment of $1 billion.

Xcel Energy aims to spend $60 billion during the 2026-2030 period. The company’s investment plan allocates $29.4 billion to enhancing electric distribution and transmission operations, while $23.4 billion will be directed toward electric generation. Additionally, the plan includes $3.6 billion for natural gas operations and another $3.6 billion for other necessary operations.

Wrapping Up

PPL Corporation and Xcel Energy have been investing steadily to upgrade their infrastructure and have elaborate plans to further strengthen and expand their existing assets. The increasing clean energy generation from these companies will allow them to meet the rising demand from customers in the service regions.

Based on the above discussion, it indicates that Xcel Energy has a better potential going into 2026. The better earnings estimate revision, cheaper valuation, better ROE and more elaborate capital expenditure plan tilt the balance towards Xcel Energy. Both these utilities currently have a Zacks Rank #3 (Hold). 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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