PPL Set to Report Q1 Earnings: Should You Hold or Sell the Stock?

PPL Corporation PPL is expected to report an improvement in its top line and a decline in its bottom line when it reports first-quarter 2025 results on April 30, before market open. (See the Zacks Earnings Calendar to stay ahead of market-making news)

The Zacks Consensus Estimate for PPL’s first-quarter revenues is pegged at $2.38 billion, indicating growth of 3.4% from the year-ago reported figure.

The Zacks Consensus Estimate for earnings is pegged at 55 cents per share. The Zacks Consensus Estimate for PPL’s first-quarter earnings indicates an increase of 1.85% from the year-ago reported figure.

PPL Stock’s Earnings Surprise History

PPL’s earnings beat the Zacks Consensus Estimate in three out of the trailing four quarters, the average surprise being 6.5%.

What the Zacks Model Unveils

Our model does not conclusively predict a likely earnings beat for PPL this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you can see below.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: PPL has an Earnings ESP of -0.85%.

Zacks Rank: PPL currently carries a Zacks Rank #3.

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

Some other stocks in the same industry that have the combination of factors indicating an earnings beat this season are DTE Energy DTE, Avista AVA and Fortis FTS. DTE, AVA and FTS carry Earnings ESP of +1.64%, +8.37% and +1.22%, respectively, and currently have a Zacks Rank of 2 each.

Factors Likely to Have Shaped PPL’s Q1 Earnings

PPL’s first-quarter earnings are likely to have gained from the ongoing cost initiatives of the company. The company is working to provide more reliable, affordable and cleaner energy to its customers by deploying smart grid technology, automation and data science.
 
PPL is experiencing load growth, driven by data center demand in its Pennsylvania and Kentucky service territories. PPL can benefit from the rising demand for data centers, as the new AI-driven data centers require more electricity than conventional data centers. Expected higher sales volume in the Pennsylvania and Kentucky regions is likely to have boosted first-quarter earnings.

During the quarter, Rhode Island Energy invested $3 million in smart switches to strengthen grid reliability, which is likely to have some positive impact on earnings as smart switches enhance the quality of the grid and will help reduce the number of outages.

PPL’s Price Performance

PPL’s shares have gained 32.6% in the past year compared with the industry’s rally of 17.5%.

PPL Stock is Trading at a Premium

The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis. PPL is trading at 19.44X compared with its industry’s 14.32X.

PPL Stock Returns Lower Than Its Industry

PPL’s trailing 12-month return on equity (ROE) is 8.88%, a tad lower than the industry average of 9.77%. ROE is a financial ratio that measures how well a company uses its shareholders’ equity to generate profits.

Investment Thesis

PPL is set to invest $20 billion through 2028 in infrastructure upgrades aimed at strengthening the grid’s resilience against weather events. These investments will improve power restoration during storms and advance the shift toward a cleaner energy mix, without compromising reliability or affordability.

PPL operates in a constructive regulatory jurisdiction. More than 60% of PPL’s capital investment plan is subject to “contemporaneous recovery,” and it 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 involved in more than 175 research and development projects. It is also in partnership with more than 30 industry and academic partners. These projects are expected to help accelerate low-carbon energy technologies to strengthen network resiliency and build the future grid.

Credit rating agencies also improved the company’s credit ratings to positive this year. As of Dec. 30, 2024, PPL had an unused credit capacity of nearly $2.68 billion, which further enhanced its liquidity. Its times-interest-earned ratio was 2.5 at the end of the fourth quarter of 2024. The strong ratio indicates that the company will be able to meet its interest obligations in the near future without any difficulties.

Wrapping Up

PPL is set to benefit from rising demand for energy in its service territories, cost savings initiatives and real-time recovery mechanisms of over 60% of capital expenditure without the need for base rate cases.

Despite PPL’s premium valuation and ROE lower than the industry, given its strong liquidity and load growth in its service territories, investors can retain this stock in their portfolio.

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

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