PPL Earnings: Addition of Rhode Island Energy Aids Results Amid Unfavorable Weather
We are maintaining our $29 per share fair value estimate for PPL after the company reported first-quarter operating earnings of $0.48 per share, up from $0.41 in the same year-ago period. The company reaffirmed its $1.50-$1.65 EPS guidance range, in line with our expectations.
The company’s 6%-8% earnings outlook remains unchanged. We expect PPL to achieve the midpoint. We expect dividend growth to be in line with earnings growth, consistent with PPL’s 7% dividend increase for 2023. PPL now trades in line with our fair value estimate after climbing 8% from its March lows.
Similar to PPL’s peers, the switch from a colder-than-normal winter in 2022 to a substantially warmer-than-normal winter this year resulted in a $0.05 per share negative year-over-year impact. Near-term changes in electricity demand driven by weather volatility have no impact on our fair value estimate. The addition of Rhode Island Energy was the main contributor of the earnings increase.
The company continues to work on securing its $11.9 billion in capital investment plan through 2026, which supports our 7% earnings growth estimate. In Rhode Island, regulators approved $290 million of investments as part of the Infrastructure, Safety, and Reliability plans. This is down from PPL’s initial $352 million request.
In Kentucky, PPL continues to work with regulators to gain support for its $2.1 billion generation investment plan, which includes 1.5 gigawatts of coal generation retirements replaced by 1.2 GW of natural gas generation and 1 GW of solar and battery storage. However, state legislation put the early coal retirements plan at risk. If regulators choose environmental controls over renewable energy replacement, the utility would be able to recover the investments through its existing environmental cost recovery mechanism without regulatory approval. However, that decision could lower the utility’s growth capital investment and earnings.
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