PPL Gains 10.9% in a Year: How Should You Play the Stock?

PPL Corporation PPL shares have gained 10.9% in a year compared with the Zacks Utility-Electric Power industry’s rally of 6.5%. PPL is benefiting from its strategic investments that should further expand its clean energy generation capacity and help achieve carbon neutrality by 2050.Shares of another operator in the same industry, FirstEnergy Corp. FE, have lost 2.2% during the same period. However, it is benefiting from its investments focused on enhancing transmission and distribution operations, which are expected to improve service efficiency. FirstEnergy’s ‘Energize365’ is a multi-year grid evolution platform, focused on enhancing customer experience while maintaining its strong affordability position with rates at or below its in-state peers.  Image Source: Zacks Investment ResearchGiven the current increase in price performance, should you consider including PPL in your portfolio? Let's examine the factors in detail and assess the stock's investment prospects.Factors Driving the Performance of PPL StockPPL benefits from its focus on infrastructure construction projects for generation, transmission and distribution. Customers have been experiencing far less outages, courtesy of the company’s initiative to further strengthen its infrastructure. PPL expects a regulated capital investment plan of $20 billion during 2025-2028. The capital investment for 2025 and 2026 is expected to be $4.3 billion and $5.2 billion, respectively.The company is also experiencing load growth, driven by increasing demand from data centers. Nearly 14.4 gigawatt (GW) of potential data center demand is in the advanced stages, representing a potential transmission capital investment of $0.75-$1.25 billion. Active data center requests have increased to 50 GW for the 2026-2034 period in the Pennsylvania segment. In the Kentucky segment, the Economic development queue holds total potential load growth of 8.5 GW, which includes active data center requests of 6 GW from 2026 to 2032 and 3 GW of manufacturing and other non-data center load. The company’s carbon emission reduction target is in sync with the objective of meeting the below 2-degree Celsius scenario. PPL plans to achieve its carbon emissions target of 70% by 2035 and 80% by 2040, relative to 2010 levels. By 2050, it also aims to achieve carbon neutrality. PPL benefits from digital transformation and automation by using advanced technology to enhance grid reliability and improve customer experience. The company’s “Self-Healing Grid” responds to issues in real-time for improved reliability at a lower cost.PPL expects its operating and maintenance (O&M) costs to reduce at least $150 million by 2025 and $175 million by 2026. In the second quarter of 2025, PPL was able to reduce O&M costs by 1.4% year over year. These initiatives are expected to enhance the company’s margins and support earnings growth.PPL Stock’s Earnings EstimateThe Zacks Consensus Estimate for PPL’s 2025 and 2026 earnings per share (EPS) indicates an increase of 7.69% and 8.42%, respectively, year over year. Image Source: Zacks Investment ResearchAnother company, Alliant Energy LNT, expects long-term capital expenditure of $11.5 billion during 2025-2028 to improve infrastructure and enhance service reliability. LNT also aims to make technology investments that help reduce operating costs and further enhance the customer experience. The Zacks Consensus Estimate for Alliant Energy’s 2025 and 2026 EPS indicates an increase of 5.92% and 6.83%, respectively, year over year.PPL Stock’s Earnings Surprise HistoryPPL beat on earnings in two of the trailing four quarters and missed in the other two, delivering a negative surprise of 0.18%. Image Source: Zacks Investment ResearchFirstEnergy also beat on earnings in two of the trailing four quarters and missed in two, delivering an average surprise of 1.2%.PPL’s Dividend HistoryPPL has a long history of dividend payments and plans to increase its annual dividend by 6-8% through at least 2028, subject to approval by its board of directors. Currently, its quarterly dividend is 27.25 cents per share, resulting in an annualized dividend of $1.09 per share. PPL’s targeted dividend payout ratio is expected to be in the range of 60-65%. It is anticipated that the company will continue to increase its dividend in the future, driven by its sustained earnings and cash flow growth. Check PPL’s dividend history here.PPL’s ROE Lower Than the IndustryPPL’s trailing 12-month return on equity of 8.81% is lower than the industry average of 10.14%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income. Image Source: Zacks Investment ResearchPPL Stock Trades at a PremiumPPL is currently trading at a premium compared with its industry on a forward 12-month P/E basis. Image Source: Zacks Investment ResearchAlliant Energy is also trading at a premium compared with its industry’s P/E F 12M.Summing UpPPL continues to benefit from systematic investments and increased demand from data centers in its service regions. PPL’s focus on cleaner generation and growth in domestic operations also acts as a tailwind.However, PPL’s lower ROE compared to its industry average and the stock’s premium valuation create concerns at the moment. The investors can hold onto this Zacks Rank #3 (Hold) stock and enjoy the benefits of regular dividends and earnings growth estimates. Given its premium valuation, new investors can wait and look for a better entry point.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PPL Corporation (PPL): Free Stock Analysis Report FirstEnergy Corporation (FE): Free Stock Analysis Report Alliant Energy Corporation (LNT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks