PPL Corporation
(
PPL
) reported first quarter 2012 pro forma earnings of 70 cents per
share compared with the year-ago earnings of 84 cents. The
year-over-year decline in earnings was due to issue of common stock
in April 2011 related to acquisitions in the United Kingdom and
decreased electricity sales as a result of a mild winter in eastern
U.S. The quarterly earnings beat the Zacks Consensus Estimate by 2
cents.
GAAP earnings during the quarter were 93 cents versus 82 cents
in the year-ago quarter. The difference between GAAP and pro forma
earnings of 23 cents was due to a gain of 26 cents for
energy-related economic activities; a charge of 2 cents associated
with foreign currency-based economic hedges, a 1 cent charge for
acquisition related adjustments, a 1 cent gain related to tax
adjustments, and counterparty bankruptcy related charge of 1
cent.
Revenue
In the reported quarter, company's total revenue was $4.1
billion compared with $2.9 billion in the prior-year quarter. The
growth in revenue was driven by higher utility, unregulated retail
electric and gas, and wholesale energy marketing revenues,
partially offset by lower revenue from energy-related businesses.
The quarterly revenue surpassed the Zacks Consensus Estimate of
$3.3 billion.
Segment Results
Kentucky Regulated Segment:
In the first quarter 2012, earnings from this segment were 6 cents
compared with 15 cents in the year-ago quarter. This year-over-year
decline was due to higher depreciation costs, a diluted impact of 1
cent per share, a mild winter and increased operation and
maintenance expenses.
U.K.
Regulated Segment:
In the reported quarter, earnings from this segment were 31 cents
compared with 16 cents in the year-ago quarter. This year-over-year
increase was primarily driven by better operating performance from
the Western Power Distribution ("WPD") Midlands businesses,
partially offset by a diluted impact of 6 cents per share, and
higher U.S. income taxes and pension expenses.
Pennsylvania
Regulated
Segment:
In the first quarter 2012, earnings from this segment were 6 cents
compared with 11 cents in the year-ago quarter. The year-over-year
decline was due to higher depreciation costs, diluted impact of 1
cent per share, a mild winter and increased operation and
maintenance expenses.
Supply Segment:
In the reported quarter, earnings from this segment were 27 cents
compared with 42 cents in the year-ago quarter. A 15-cent
year-over-year decline in earnings was due to decreased Eastern
energy margins related to lower energy and capacity prices,
partially offset by an increase in nuclear generation.
Operational Update
Total operating expenses in the reported quarter were $3.1
billion versus $2.1 billion in the year-ago quarter.
In first quarter 2012, company's operating income was $1.1
billion compared with $0.8 billion in the prior-year quarter.
Interest expenses were $0.23 billion in first quarter 2012
versus $0.17 billion in the year-ago quarter.
Financial Update
Cash and cash equivalents as of March 31, 2012 were $1.1 billion
compared with $1.2 billion as of December 31, 2011.
As of March 31, 2012, long-term debt was $18.1 billion versus
$18 billion as of December 31, 2011.
In the first quarter of 2012, the company generated cash from
operating activities of $0.7 billion compared with $0.2 billion in
the prior-year quarter.
Fiscal 2012 Outlook
For fiscal 2012, PPL Corporation reiterated its pro forma
earnings guidance in the range of $2.15 to $2.45 per share and GAAP
earnings guidance in the range of $2.38 - $2.68 per share.
The company expects Kentucky Regulated, U.K. Regulated,
Pennsylvania Regulated and Supply segments to contribute 33 cents,
$1.07, 20 cents and 70 cents, respectively, to pro forma
earnings.
At the Peer
The AES Corporation
(
AES
), which competes with PPL Corporation, announced adjusted earnings
for the first quarter 2012 of 37 cents per share versus 24 cents
per share in the year-ago quarter. Earnings missed the Zacks
Consensus Estimate of 28 cents.
In the reported quarter, company's revenue was $4.7 billion,
higher than the year-ago revenue by $584 million. The quarterly
revenue fell short of the Zacks Consensus Estimate by $60
million.
Our View
PPL Corporation's results in the first quarter surpassed our
expectations on the back of strong contribution from its higher
utility, unregulated retail electric and gas, and wholesale energy
marketing operations.
But we are concerned about the performance of the company's
Kentucky Regulated, Pennsylvania Regulated and Supply segments in
fiscal 2012. These segments are continually dragging down the
company's overall result.
However, we view PPL Corporation as a well positioned
organization with a strong growth potential associated with higher
contribution from Midlands businesses and frequent acquisitions. We
expect that the acquisition of units of AES Corporation will act as
a positive catalyst as PPL presently intends to use oil and natural
gas as raw materials for electricity generation.
As PPL is the raw material supplier of the AES units, we believe
it will likely benefit from the overall operational synergies post
acquisition. This acquisition will help the company to strengthen
its Pennsylvania segment's natural gas portfolio with higher
revenue generation.
PPL Corporation currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating.
Allentown, Pennsylvania-based PPL Corporation is an energy and
utility holding company. Through its subsidiaries, PPL generates
electricity from power plants in Northeastern, Northwestern
and Southeastern U.S., markets wholesale or retail energy primarily
in northeastern and northwestern portions of the United States,
delivers electricity to customers in Pennsylvania, Kentucky,
Virginia, Tennessee and the U.K. and delivers natural gas in
Kentucky.
PPL CORP (PPL): Free Stock Analysis Report
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