PPL Corporation PPL is currently trading at a forward 12-month P/E of 18.80X compared with the Zacks Utility Electric Power industry’s 14.41X.

PPL’s premium valuation is yet to be a concern as it is operating in constructive regulatory jurisdictions, and improving economic development in its service regions is creating significant demand, primarily from the data centers.
 
PPL plans to invest $20 billion through 2028 to strengthen its infrastructure and prevent outages. The company is also working to lower emissions from electricity production and develop a net-zero energy system by 2050.

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Another utility in the same space, Dominion Energy D, is currently trading at a forward 12-month P/E of 16.01X, a premium compared to the industry.

PPL Stock Beats Industry, Sector & S&P500

In the past three months, the company’s shares have gained 8.2% compared with the industry’s 5% rally. PPL has also outperformed the Zacks Utilities sector’s return of 4.5%, and the S&P 500 has dropped 5.4% in the same period.

Price Performance (Three months)

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Should you consider adding PPL to your portfolio only based on positive price movements? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add PPL stock to their portfolio.

Factors Contributing Toward Strong Performance of PPL Stock

PPL’s Pennsylvania and Kentucky service regions continue to attract data centers’ interest. These data centers are creating demand for PPL services and will continue to generate demand in the future, as well as boosting the performance of the company. New data center requests have increased in Pennsylvania and Kentucky to 48 gigawatts (GW) and 6 GW over the 2026-2034 period, respectively.

The Pennsylvania and Kentucky service regions registered 1.1% and 1.2% year-over-year increases in electric sales volume in 2024, respectively. The new data center connections will lower transmission costs for retail customers as the load ramps up and attracts more retail customers for PPL services.

PPL plans to invest $20 billion for the 2025-2028 period to further strengthen its operation and continue providing high-quality services to its customers. Over 60% of PPL’s capital investment plan is subject to “contemporaneous recovery,” which reduces the impact of regulatory lag on earnings for investments. The recovery of capital expenditures enables the company to fund long-term projects easily.

PPL continues with its cost savings initiatives and expects to reduce expenses by at least $175 million by 2026 from the 2021 baseline. Proper management of expenses will boost the company’s margins.

PPL’s Earnings Estimate Moves Up

The company expects EPS of $1.75-$1.87 for 2025. The Zacks Consensus Estimate is currently pegged at $1.82 per share.

The Zacks Consensus Estimate for PPL’s 2025 and 2026 earnings per share indicates year-over-year increases of 7.69% and 7.93%, respectively.

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PPL Increases Shareholders’ Value

PPL aims to increase its dividend per share in the range of 6-8% annually through 2027, subject to its board’s approval. The company’s current annual dividend is $1.09. The current dividend yield is 3.13% better than the industry’s yield of 3.07%.

PPL’s payout ratio at the end of 2024 was 61%. With continued strength in its earnings and cash flow growth, PPL is expected to continue boosting its dividend going forward. Check PPL’s dividend history here.

PPL Stock Returns Lower Than the Industry

PPL’s trailing 12-month return on equity of 8.88% is lower than the industry average of 9.75%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.

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Wrapping Up

PPL's investment in increasing clean energy production volumes and strengthening its grid will assist in providing reliable service to its customers. Efficient management of operations and constructive regulatory jurisdiction add to the company’s advantage.

This company’s lower ROE than the industry raises minor concerns as it missed earnings estimates in the last reported quarter. Yet, it will be wise to remain invested in this Zack Rank #3 (Hold) stock and enjoy the benefits of stable dividends and expected load growth in its service territories.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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