PPL Stock Outperforms its Industry in Six Months: How to Play?

PPL Corp. PPL shares have rallied 9.4% in the last six months against the Zacks Utility-Electric Power industry’s decline of 2.8%. The company continues to provide electricity and natural gas to its 3.6 million customers across the United States. In the same period, PPL has also outperformed the Zacks Utilities sector.PPL is making systematic investments to upgrade its infrastructure, reduce its carbon footprint and provide reliable services to its customers. It plans to invest $20 billion through 2027 to strengthen its infrastructure and prevent outages. The company is also working to lower emissions from electricity production and develop a net-zero energy system by 2050.PPL Outperforms Industry & Sector (Six Months)Image Source: Zacks Investment ResearchPPL is trading above its 50-day and 200-day simple moving averages (SMAs), signaling a bullish trend. The company has reposited itself as a U.S.-focused energy company after the divestiture of its international operation.PPL's 50 & 200-Day SMAImage Source: Zacks Investment ResearchThe 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.Should you consider adding PPL to your portfolio only based on positive price movements? Let us delve deeper and find out factors that can help investors decide whether it is a good entry point to add the PPL stock to their portfolios.PPL’s Systematic Capital Expenditure PlanPPL belongs to a capital-intensive industry, and the companies operating in this industry need to make regular capital investments to upgrade, maintain and expand infrastructure to provide reliable services to customers. The drop in interest rate will be beneficial for utilities like PPL as they have well chalked out capital investment plans.PPL’s capital investment plan primarily focuses on infrastructure construction projects for generation, transmission and distribution. Customers have been experiencing far fewer outages, courtesy of the ongoing investments in strengthening its infrastructure. The company is planning to invest $20 billion for the 2025-2028 period to further strengthen its operation and continue providing high-quality services to its customers.Over 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’s Ongoing Initiatives in Emission ReductionPPL’s carbon emission reduction target is presently following the international climate policy goal to limit global warming within 2 Celsius above pre-industrial levels. The company plans to achieve its carbon emissions target of 70% by 2035 and of 80% by 2040, from its 2010 levels.PPL will continue to reduce emissions through the introduction of new carbon capture technology and add more renewable sources to the generation portfolio. It also aims to become carbon neutral by 2050. This initiative can help the company to lower the cost of operations by focusing on new and advanced assets.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.Another utility, Xcel Energy XEL, aims to achieve carbon emission neutrality within 2050 by adding new clean energy projects and retiring coal power plants. Xcel Energy plans to spend $45 billion during the 2025-2029 period. These investments are aimed at strengthening and expanding its transmission, distribution, electric generation and renewable projects. Due to timely upgrades and efficient management of its operation, Xcel Energy’s residential electric and natural gas bills are 28% and 12%, lower than the national average.PPL’s Efficient Management is Lowering Operating ExpensesPPL is also working to reduce its operating and maintenance costs by at least $175 million through 2026. In 2024, PPL achieved $130 million in savings from the 2021 baseline and is on course to achieve $150 million in savings in 2025 from the 2021 level.The company is focused on reducing total operating expenses in the coming years, due to a decrease in fuel cost and energy purchases. PPL implements scalable technologies throughout the business to reduce expenses. These initiatives should boost the company’s margins and support earnings growth.PPL’s Earnings Estimate Moving NorthThe company expects EPS of $1.75-$1.87 for 2025. The Zacks Consensus Estimate is currently pegged at $1.82 per share.The Zacks Consensus Estimate for PPL’s 2025 and 2026 earnings per share indicates year-over-year increases of 7.69% and 7.82%, respectively. Image Source: Zacks Investment ResearchPPL Raises Shareholders’ ValuePPL continues to return value to its shareholders through dividend payments.The company’s current annual dividend is $1.09. PPL projects dividend growth of 6-8% per year through 2027, subject to the approval of its board of directors. The dividend growth expectation is on par with its earnings growth expectation. It has raised its annual dividend four times in the past five years.PPL’s targeted dividend payout ratio is expected to be in the range of 60-65%. With continued strength in its earnings and cash flow growth, the company is expected to continue boosting its dividend going forward. Check PPL’s dividend history here.PPL Stock Trading at a PremiumPPL is currently valued at a premium compared to its industry on a forward 12-month P/E basis. The current P/E F12M of the company is 18.66X compared with the industry’s average of 13.96X.Image Source: Zacks Investment ResearchAnother utility, American Electric Power AEP, operating in the same space, is also trading at a premium compared to its industry. AEP’s current P/E F12M of the company is 17.47X. American Electric aims to invest nearly $25.4 billion in its transmission and distribution business during the 2025-2029 period to construct a more efficient grid and deliver customized energy solutions to its customers.Summing UpPPL is set to benefit from rising demand for energy in its service territories, cost savings initiatives will continue to boost margins of the company. Real-time recovery mechanisms of over 60% of capital expenditure without the need for base rate cases allow the company to fund long-term projects easily.The company’s shares are currently trading at a premium compared with its industry. Those who already own this Zacks Rank #3 (Hold) stock can retain it in their portfolios and enjoy the regular dividend. The new investors can wait for a better entry point.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PPL Corporation (PPL): Free Stock Analysis Report Xcel Energy Inc. (XEL): Free Stock Analysis Report American Electric Power Company, Inc. (AEP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks