PPL Corporation PPL reported second-quarter 2015 adjusted earnings of 49 cents per share, surpassing the Zacks Consensus Estimate of 47 cents by 4.3%. Quarterly earnings also increased 11.4% year over year from 44 cents per share due to higher contribution from all segments.
On a GAAP basis, the company reported loss per share of $1.13 in the quarter compared with earnings of 34 cents a year ago. The variance between GAAP and adjusted earnings was due to certain special items, including the Supply segment's earnings and the loss from discontinued operations associated with the spin-off of the Supply segment.
Total Revenue
PPL Corp.’s total revenue of $1,781 million missed the Zacks Consensus Estimate of $2,909 million by 38.8%. The top line also dipped 3.7% on a year-over-year basis due to lower revenues from both the utility and energy-related businesses.
Segment Results
UK Regulated Segment: Adjusted earnings increased by 3 cents per share on a year-over-year basis to 36 cents. The increase was attributable to lower depreciation expense and lower income taxes, partially offset by lower utility revenues and primarily driven by announced price decrease on Apr 1, 2015 associated with the beginning of a new 8-year price control period.
Kentucky Regulated Segment: Adjusted earnings were flat at 9 cents compared with the prior year as returns on additional environmental capital investments were offset by lower sales volumes and higher operations and maintenance expense associated with the retirement of coal-fired generation at the segment’s Cane Run facility.
Pennsylvania Regulated Segment: Adjusted earnings fell by a penny from the prior year to 7 cents in the quarter. The decrease was due to higher operations and maintenance expense and higher depreciation expense, partially offset by higher margins from additional transmission capital investments.
Corporate and Other: Adjusted earnings improved by 3 cents to a loss of 3 cents in the quarter due to the benefits of the corporate restructuring.
Operational Highlights
PPL Corp.’s total operating expenses decreased 2.4% year over year to $1,143 million, mainly due to lower fuel costs and depreciation along with marginal declines in energy purchase expense, taxes (other than income), and energy-related businesses expenses.
The company reported operating income of $638 million, down 5.9% compared with $678 million a year ago.
Interest expenses rose 3.4% to $215 million from $208 million a year ago.
Dividend
Due to strong performance in the first half of the year, PPL Corp. increased its quarterly dividend to 37.75 cents per share, raising annualized dividend by 1.3% to $1.51 per share from $1.49.
This is the company’s 13th dividend increase in 14 years. The revised dividend is payable on Oct 1, 2015 to shareholders of record as of Sep 10.
Financial Position
As of Jun 30, 2015, PPL Corp. had cash and cash equivalents of $846 million compared with $1,399 million as of Dec 31, 2014. Long-term debt (excluding due within one year) was $17,103 million as of Jun 30, 2015 compared with $17,173 million at the end of 2014.
In the first half of 2015, net cash flow from operating activities (continuing operations) was $970 million compared with $1,293 million in the prior-year period.
Guidance
PPL Corp. narrowed its 2015 adjusted earnings guidance to the range of $2.15 to $2.25 per share from $2.05 to $2.25 per share, increasing the midpoint of guidance to $2.20 per share from $2.15. The 2015 guidance for GAAP earnings is in the range of 72 to 82 cents per share, reflecting special items recorded through the second quarter.
The midpoint of adjusted earnings guidance for UK Regulated, Kentucky Regulated segment and Pennsylvania Regulated are pegged at $1.41, 51 cents and 38 cents, respectively for the year.
The company continues to expect annual earnings growth in the range of 4%–6% through at least 2017.
Zacks Rank
PPL Corp. currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the utility space include Empresa Nacional de Electricidad S.A. EOC and Enersis S.A. ENI, both sporting a Zacks Rank #1 (Strong Buy), and American Electric Power Co., Inc. AEP, holding a Zacks Rank #2 (Buy).
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