PPL Corp. Beats Q4 Earnings, Misses Revs

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PPL Corporation (PPL) reported fourth-quarter 2013 earnings from ongoing operations of 60 cents, beating the Zacks Consensus Estimate by 17.6%. Quarterly earnings climbed 22.4% year over year due to improved performance from Kentucky Regulated (up 50%), U.K. Regulated (up 3.4%), Pennsylvania Regulated (up 40%) and Supply (up 85.7%) segments.

On a GAAP basis, the company posted a loss of 16 cents per share compared with earnings of 60 cents per share a year ago.

For 2013, PPL Corporation reported earnings from ongoing operations of $2.45 per share, surpassing the Zacks Consensus Estimate by 3.8%. Annual earnings were 1.2% higher than the prior-year figure.

Annual GAAP earnings per share were $1.76 compared with $2.60 in the prior year. The variance between GAAP earnings and earnings from ongoing operations was due to the combined impact from a 11 cents charge for the adjusted energy-related economic activity, a charge of 3 cents for the foreign currency-related economic hedges, Corette asset impairment charge of 6 cents, a penny charge from the WPD Midlands acquisition-related adjustments, a penny charge for the change in tax accounting method associated with repairs, a charge of 5 cents for change in WPD line loss accrual, a charge of 62 cents for loss on Colstrip lease termination to facilitate the sale of Montana hydro assets, a gain of 13 cents related to changes in the U.K. tax rate, Windfall tax litigation gain of 6 cents and a penny gain from the WPD Midlands acquisition-related adjustments.

Revenue

PPL Corporation posted total operating revenues of $2.8 billion in fourth-quarter 2013, missing the Zacks Consensus Estimate by 12.2%. Quarterly revenues dropped 11.6% primarily due to unregulated wholesale energy sales.

The company’s annual revenues were $11.9 billion, beating the Zacks Consensus Estimate by 0.2%. However, reported revenues decreased 3.5% from $12.3 billion a year ago.

Operational Update

In the quarter under review, total operating expenses were $2,817 million, up 17.4% year over year mainly due to higher fuel costs, a rise in depreciation expenses and higher costs on energy-related businesses.

The company’s quarterly operating income decreased substantially to $31 million from the year-ago figure of $822 million.

PPL Corporation delivered 16,765 Gigawatt hours (“GWh”) domestic retail electricity, up 3.9% year over year.

The company supplied 10,949 GWh domestic retail electricity, up 7.8% from the year-ago 10,153 GWh, primarily due to a rise in sales at PPL EnergyPlus.

Internationally, the company’s volume of electricity delivery edged down 1.7% year over year to 19,177 GWh.

In the domestic wholesale business, the company’s sales jumped 31.2% year over year to 16,849 GWh on the back of higher contribution from the PPL EnergyPlus – East business

Financial Update

As of Dec 31, 2013, PPL Corporation had cash and cash equivalents of $1.1 billion versus $0.9 billion as of Dec 31, 2012.

Long-term debt (noncurrent) as of Dec 31, 2013 was $20.6 billion compared with $18.7 billion at the end of 2012.

Net cash provided by operating activities in 2013 was $2.9 billion compared with $2.8 billion in the prior-year comparable period.

In 2013, the company’s capital expenditure increased 35.7% year over year to $4.3 billion.

Dividend Update

PPL Corporation increased its quarterly dividend by 1.4% sequentially to 37.25 cents per share. On an annualized basis, the new dividend rate will be $1.49 per share. The incremental dividend will be paid on Apr 1, 2014 to shareowners of record as of Mar 10, 2014.

Guidance

PPL Corporation provided earnings guidance for 2014, which is in the range of $2.05 - 2.25 per share with mid-point of $2.15. Projected earnings are lower than 2013 earnings primarily due to a drop in energy margins in the Supply segment.

Other Company Releases

American Electric Power Company Inc. (AEP) reported fourth quarter 2013 operating earnings of 60 cents per share, beating the Zacks Consensus Estimate by 7.1%.

CMS Energy Corp. (CMS) posted fourth-quarter 2013 earnings per share of 37 cents on both adjusted and GAAP basis. The quarterly figure was at par with the Zacks Consensus Estimate.

NextEra Energy Inc. (NEE) announced fourth-quarter 2013 operating earnings of 95 cents per share, missing the Zacks Consensus Estimate by a penny.

Our View

PPL Corporation reported positive earnings surprises in 5 out of the last 7 quarters. Higher returns from additional environmental capital spending, higher electricity delivery revenues in the U.K., and improved nuclear generation volume and capacity prices at the Supply segment helped the company to beat quarterly earnings.

We appreciate PPL Corporation’s steady effort towards upgrading traditional electricity transmission and distribution infrastructure and expanding the renewable portfolio, backed by strong financial profile. These initiatives will enable the company to provide reliable services to its customers.

PPL Corporation currently has a Zacks Rank #3 (Hold).

Read the Full Research Report on PPL
Read the Full Research Report on AEP
Read the Full Research Report on CMS
Read the Full Research Report on NEE


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