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Why Is PPL Down 7.5% Since its Last Earnings Report?

A month has gone by since the last earnings report for PPL Corporation PPL. Shares have lost about 7.5% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PPL due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

PPL Corp. Beats Q4 Earnings Estimates, Gives '18 View

PPL Corporation reported fourth-quarter 2017 adjusted earnings of 55 cents per share, beating the Zacks Consensus Estimate of 48 cents by 14.6%. However, earnings declined 8.3% year over year, primarily due to lower contribution from U.K. Regulated segment.

On a GAAP basis, the company reported earnings per share of 11 cents in the quarter compared with 68 cents a year ago. The difference between GAAP and operating earnings in the reported quarter was due to one-time charge of 44 cents primarily to the impact of U.S. tax reforms.

Total Revenues

PPL Corp.’s total revenues were $1,926 million in the fourth quarter, beating the Zacks Consensus Estimate of $1,855 million by 3.8%. Revenues also improved 5.1% year over year.

Segment Results

U.K. Regulated: Adjusted earnings decreased 27.5% from the prior-year quarter to 29 cents per share. The decline was primarily due to lower foreign currency exchange rates in 2017 and lower sales volumes.

Kentucky Regulated: Adjusted earnings were 14 cents, up 16.7% from the year-ago quarter. The earnings are primarily driven by higher base electricity and gas rates effective Jul 1, 2017, and higher sales volumes due to favorable weather, partially offset by higher depreciation expense.   

Pennsylvania Regulated: Adjusted earnings in the quarter were 14 cents, up 27.3% from the year-ago quarter. The year-over-year improvement was due to lower operating and maintenance expenses, and higher transmission earnings due to additional capital investments.

Corporate and Other: It includes unallocated corporate-level financing and other costs. The segment reported a loss of 2 cents for the quarter against a loss of 3 cents in the prior-year quarter.

Operational Highlights

PPL Corp.’s total operating expenses increased 1.3% year over year to $ 1,133 million in the reported quarter.

The company reported operating income of $793 million, up 11.1% from the prior-year quarter.

Interest expenses increased 6.9% to $232 million compared with the year-ago quarter’s figure of $217 million.

Financial Position

As of Dec 31, 2017, PPL Corp. had cash and cash equivalents of $485 million compared with $341 million as of Dec 31, 2016.

Long-term debt (excluding debts due within one year) was $19,847 million as of Dec 31, 2017, compared with $17,808 million at the end of 2016.

In 2017, net cash flow from operating activities was $2,461 million compared with $2,890 million in 2016.

Guidance

PPL Corp. expects 2018 adjusted earnings to be in the range of $2.20-$2.40 per share. The company also provided compound earnings growth guidance of 5-6% from 2018 through 2020 with 2017 as the base.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

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PPL Corporation Price and Consensus

PPL Corporation Price and Consensus | PPL Corporation Quote

VGM Scores

At this time, PPL has a poor Growth Score of F, however its Momentum is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision looks promising. Notably, PPL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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