New PPL Delivering on Promises, Positioning It Well for Future Growth

We are maintaining our $29 per share fair value estimate for PPL PPL after the company reported full-year 2022 operating earnings per share of $1.41, up from $1.05 in 2021 and in line with its earnings guidance of $1.35-$1.45. Our narrow economic moat and stable moat trend ratings remain unchanged.

The company reaffirmed its $1.50-$1.65 EPS guidance for 2023, in line with our expectations. PPL increased its dividend 7%, highlighting its dividend growth potential after the divestiture of its U.K. utility and full incorporation of the Narragansett Electric acquisition.

PPL reaffirmed many of the positive developments discussed at its investor day earlier this year. The most material update was a $2.5 billion increase in the company’s 2022-26 capital investment plan, a 20% increase to $14.3 billion. That raised our earnings outlook to 7% from 6%, and in line with management’s extended 6%-8% range. Additionally, the company increased its cost savings expectations to $175 million through 2026. As a result of these changes, we previously increased our fair value estimate by $2 per share. PPL now trades in line with our fair value estimate.

Full-year earnings benefited from capital investments and increased electricity sales. The use of funds from its U.K. transaction, which included the purchase of Narragansett, share repurchases, and debt reduction, boosted results. Overall, we think the use of proceeds created shareholder value, moving away from the deteriorating regulatory environment in the U.K. toward more constructive regulatory environments in the U.S.