PPL Corporation (PPL) reported third-quarter 2014 adjusted earnings of 54 cents per share, surpassing the Zacks Consensus Estimate of 52 cents by 3.9%. Quarterly earnings decreased 18.2% year over year due to lower contribution from the UK Regulated, Kentucky Regulated and Supply segments. The Pennsylvania Regulated segment posted flat year-over-year performance in the quarter.
On a GAAP basis, the company’s earnings per share were 74 cents compared with 62 cents a year ago. The variance between GAAP and adjusted earnings was due to 16 cents gain for foreign currency-related economic hedges, a gain of 7 cents related to adjusted energy-related economic activity, a penny gain from the separation benefits, and a 4-cent charge for the change in tax valuation allowances and separation costs associated with the expected spin-off of PPL Energy Supply.
Total Revenue
In the third quarter, PPL Corporation’s total revenue of $3.45 billion beat the Zacks Consensus Estimate by 20.2%. On a year-over-year basis, the top line surged 12.2% primarily on the back of higher revenues from the utility and unregulated wholesale energy business.
Operational Highlights
In the quarter under review, PPL Corporation’s total operating expenses increased 15.8% year over year to $2,580 million, mainly due to higher energy purchase costs, and depreciation and energy-related business expenses.
The company reported operating income of $869 million, up 2.7% from $846 million a year ago.
Interest expenses in the third quarter stood at $258 million compared with $244 million in the prior-year quarter.
Business Update
PPL Corporation has been making considerable progress towards the spin-off of its competitive energy business and anticipates completing the Talen Energy Corporation transaction, in collaboration with an energy and power investment firm, Riverstone Holdings LLC., in the first or second quarter of 2015.
Financial Update
As of Sep 30, 2014, PPL Corporation had cash and cash equivalents of $1.19 billion versus $1.1 billion as of Dec 31, 2013.
Long-term debt as of Sep 30, 2014 was $20.52 billion compared with $20.59 billion at the end of 2013.
Net cash from operating activities in the first nine months of 2014 was $2.63 billion compared with $2.22 billion in the prior-year period.
Guidance
PPL Corporation increased its 2014 guidance for earnings from ongoing operations to $2.37–$2.47 per share from the previous projection of $2.20–$2.40 per share, considering the improved performance of regulated businesses and steady growth of the competitive energy supply operations.
Other Peer Releases
Edison International (EIX) reported third-quarter 2014 adjusted earnings of $1.52 per share, surpassing the Zacks Consensus Estimate of $1.35 by 12.6%.
Exelon Corp. (EXC) announced third-quarter 2014 operating earnings of 78 cents per share, beating the Zacks Consensus Estimate of 71 cents by 9.8%.
Public Service Enterprise Group Inc. (PEG) reported third-quarter 2014 operating earnings of 77 cents per share, surpassing the Zacks Consensus Estimate of 75 cents by 2.7%.
Our View
Though PPL Corporation’s earnings decreased year over year, the company reported positive earnings surprises in last four quarters.
We appreciate the company’s systematic investments in upgrading transmission and distribution systems, and expanding its renewable portfolio. Collectively, these initiatives will allow PPL Corporation to provide reliable services to its customers and improve cash inflow, going forward.
PPL Corporation currently has a Zacks Rank #3 (Hold).
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