PPL Corp. Beats on Q1 Earnings, Lags Revs - Analyst Blog

PPL Corporation PPL reported its first quarter 2014 earnings from ongoing operations of 80 cents per share, surpassing the Zacks Consensus Estimate of 68 cents by 17.6%. Quarterly earnings climbed 12.7% year over year due to improved performance from Pennsylvania Regulated (up 30%), Kentucky Regulated (up 14.3%) and U.K. Regulated (up 10.8%) segments. The company's Supply segment reported flat result in the first quarter.

On a GAAP basis, the company's earnings were 49 cents compared with 65 cents a year ago. The variance between GAAP earnings and earnings from ongoing operations was due to the combined impact of various charges.

These include a charge of 20 cents associated with the adjusted energy-related economic activity, an 8 cents charge for the change in WPD line loss accrual, a charge of 2 cents associated with the impairment of Kerr Dam project and a penny charge for the foreign currency-related economic hedges.

Revenue

PPL Corporation posted total operating revenues of $1,223 million in first quarter 2014, missing the Zacks Consensus Estimate by 64.4%. Quarterly revenues dropped 50.2% from the year-ago level, primarily due to substantial loss in the company's unregulated wholesale energy operations.

Operational Update

In the quarter under review, PPL Corporation's total operating expenses plummeted 71.2% year over year to $508 million. Total operating expenses benefited due to the inclusion of realized and unrealized gains on physical and financial commodity purchase contracts resulting from the unusual cold weather.

The company's quarterly operating income edged up 3.2% to $715 million from the prior-year figure of $693 million.

PPL Corporation delivered 19,125 Gigawatt hours (GWh) domestic retail electricity, up 6.6% year over year.

The company supplied 12,272 GWh of domestic retail electricity, up 8.8% from the year-ago figure of 11,281 GWh primarily due to a rise in sales at PPL EnergyPlus.

Internationally, the company's volume of electricity delivery edged down 3.4% year over year to 21,015 GWh.

In the domestic wholesale business, the company's sales rose 7% year over year to 17,856 GWh on the back of higher contribution from the PPL EnergyPlus – East business.

Financial Update

As of Mar 31, 2014, PPL Corporation had cash and cash equivalents of $1.26 billion versus $1.1 billion as of Dec 31, 2013.

Long-term debt as of Mar 31, 2014 was $20.51 billion compared with $20.59 billion at the end of 2013.

Net cash provided by operating activities in first three months of 2014 was $0.93 billion compared with $0.24 billion in the prior-year comparable period.

Guidance

PPL Corporation increased its guidance for 2014 earnings from ongoing operations to $2.15 - $2.30 per share, from the previous projection of $2.05 - $2.25 per share. The mid point earnings guidance increased to $2.23 per share from an earlier estimate of $2.15 per share. An upward revision in earnings guidance was primarily due to higher transmission margins under Pennsylvania Regulated segment and an increase in electricity delivery revenues under U.K. Regulated segment.

Other Company Releases

Exelon Corp. EXC announced first quarter 2014 adjusted operating earnings of 62 cents per share, missing the Zacks Consensus Estimate by 10.1%.

Dominion Resources Inc. D reported first quarter 2014 operating earnings of $1.04 per share, 8.3% higher than the Zacks Consensus Estimate of 96 cents.

NiSource Inc. NI reported first quarter 2014 operating net earnings of 82 cents per share, surpassing the Zacks Consensus Estimate by 5.3%.

Our View

Beneficial impact of severe winter weather across PPL Corporation's domestic regulated utilities and competitive generation business, improved utility revenues under the U.K. Regulated segment and higher transmission margins from additional capital spending under Pennsylvania Regulated segment helped the company to beat quarterly earnings.

PPL Corporation's systematic investment in order to upgrade electricity transmission and distribution infrastructure and expand the renewable asset base will enable it to provide reliable services to its customers.

PPL Corporation currently has a Zacks Rank #2 (Buy).