PPL vs. FirstEnergy: Which Utility Stock Powers Up Stronger Returns?

Utility service providers benefit from a number of positive factors, including increased electricity tariffs, accretive acquisitions, cost reductions and the deployment of energy-efficiency initiatives. The power industry also benefits from ongoing efforts to increase the resilience of electric infrastructure to unfavorable weather conditions and the ongoing transition to inexpensive, renewable energy sources for the generation of electricity.The maintenance and improvement of utilities' current infrastructure heavily rely on capital expenditures. These expenditures go toward updating, modernizing and repairing assets. In order to meet the growing demand for data centers, utility providers are investing in output enhancement.As a result of the transition to renewable energy, electric utilities in the United States are becoming more than just revenue generators. Climate measures and federal incentives are changing the utilities sector. The utilities leading this shift are well-positioned to grow gradually, providing investors with a low-risk avenue to participate in the expanding clean energy sector.With the increasing clean energy market and rising demand from data centers, utility companies like PPL Corporation PPL and FirstEnergy FE are becoming attractive investment options. Both companies are major regulated electric utilities that are making strategic investments in grid infrastructure upgrades.PPL’s PerspectivePPL continues to benefit 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 is focused on more robust engineering and construction specifications to strengthen and automate the grid to mitigate increasing weather and storm risks. These measures will increase the resilience of its service and allow it to serve rising demand from customers efficiently.In the Pennsylvania segment, nearly 14.4 gigawatts (GW) (up from 11 GW) of potential data center demand are in the advanced stages, representing a potential transmission capital investment of $0.75-$1.25 billion (up from $700-$850 million). Active data center requests have increased to 50 GW for the 2026-2034 period. 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.FE’s PerspectiveFirstEnergy expanded its regulated activities and underwent a complete transition to become a fully regulated utility company in the past few years. Compared to the previous year, FirstEnergy is benefiting from better economic conditions and increased demand from commercial and industrial organizations. This is expected to boost it top line. FirstEnergy is set for data center development across its footprint.FirstEnergy's projected long-term pipeline demand (beyond 2029) for data center load has grown more than 80% since February 2025, now totaling 11.1 GW. Furthermore, the contracted data center load expected through 2029 has increased around 25% to 2.7 GW, suggesting assured revenues from current agreements.Let's compare the two stocks' fundamentals to find out which one is a better investment pick at present.How Do Zacks Estimates Compare for PPL & FE?The Zacks Consensus Estimate for PPL’s 2025 and 2026 earnings per share (EPS) indicates an increase of 7.69% and 8.33%, respectively.  Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for FirstEnergy's 2025 and 2026 EPS indicates a decrease of 3.8% and an increase of 6.72%, respectively. Image Source: Zacks Investment ResearchPPL & FE’s Return on Equity (ROE)ROE measures how efficiently a company is utilizing its shareholders’ funds to generate profits. PPL’s current ROE is 8.81% compared with FirstEnergy's 11.31%. FE outperforms the industry’s average ROE of 10.14%.PPL & FE’s Strategic Investment PlansPPL continues to make investments to strengthen the grid, electricity and gas distribution, electricity transmission and expand clean energy generation capacity. It 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. 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. It has planned investments of $28 billion between 2025 and 2029. The company expects its 2025 capital investment to be $5 billion, which suggests an increase of 11.1% from the prior-year level.PPL & FE’s Dividend YieldUtility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for PPL is 2.97% compared with the Zacks S&P 500 Composite’s average of 1.16%, and the same for FirstEnergy is 4.09%.Debt Position of PPL & FEThe debt-to-capital ratio is a vital indicator of the financial position of a company. The indicator shows the amount of debt used to run a business. PPL and FirstEnergy have a debt-to-capital of 55.47% and 64.56%, respectively, compared with the industry’s 59.75%. Currently, the times interest earned (TIE) ratio for PPL is 2.6, and the same for FE is 2.7. Both companies have maintained their TIE ratio at more than 1 for over a decade now. This indicates that they have enough financial flexibility to meet their near-term debt obligations.PPL or FE: Which Is a Better Pick Right Now?In order to increase service reliability, PPL and FirstEnergy benefit from their strategic infrastructure investments. Both stocks are set to take advantage of the increasing demand from data centers. However, our choice at the moment is PPL, given its better debt management and growth in earnings estimates. Both PPL and FE stocks carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. One Big Gain, Every Trading DayTo help you take full advantage of this market, you’re invited to access every stock recommendation in all our private portfolios - for just $1.Zacks private portfolio services that closed 256 double and triple-digit winners in 2024 alone. That’s about one big gain every day the market was open. Of course, not all our picks are winners, but members have seen recent gains as high as +627% +1,340%, and +1,708%.Imagine how much you could profit with a steady stream of real-time picks from all our services that cover a number of strategies to suit a variety of investing and trading styles.See Stocks Now >>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 ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks