PPL Corp Plans U.K. Utility Sale, To Focus on U.S. Operations

Zacks Equity Research
·3-min read

Shares of PPL Corporation PPL have gained 6.3% since the company announced plans to sell its U.K. utility business. This rally reflects investors’ bullish sentiment about the decision.

Details of the Sale

The company engaged JP Morgan Securities LLC as its financial advisor to assist in the sale process with an intent to announce a transaction in the first half of 2021. A comprehensive strategic review was conducted by the board of directors that assessed the company's business mix and growth opportunities before taking the final call to proceed with U.K. assets’ sell-off process.

Management mentioned that it will be evaluating a variety of offers for the sale of Western Power Distribution (WPD) including all cash or a combination of cash and U.S. utility assets.

Motive Behind the Divestiture

Though WPD continues to deliver a strong performance, PPL Corp believes that this sale and the strategic repositioning of its portfolio to be fully U.S.-base dare expected to boost its shareowner value. The company intends to use the sales proceeds to strengthen its balance sheet and enhance its long-term earnings growth.

Furthermore, this decision will simplify its business mix along with providing greater financial flexibility. Moreover, it will help the company focus on building tomorrow's energy infrastructure and advance toward a cleaner energy future in the United States.

Remarkably, PPL Corp is going to invest nearly $14 billion during the 2020-2024 period of which $5.9 billion was allocated to the U.K. Regulated segment to strengthen grid, electricity and gas distribution, expand renewable generation capacity and focus on new technology to serve customers more efficiently. The company’s divestiture decision along with its capital plans will aid it to boost its operations in the United States, thereby benefiting its shareholders.

Zacks Rank & Price Performance

Currently, the stock carries a Zacks Rank #3 (Hold). Following the news of the impending divestment, shares of the company have risen 6.3% against the industry’s decline of 1.9%.

Key Picks

A few better-ranked stocks from the same industry are CMS Energy Corporation CMS, Portland General Electric Company POR and Huaneng Power International, Inc. HNP, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term (three to five years) earnings growth rate for CMS Energy is pegged at 7.01%. It has a trailing four-quarter earnings surprise of 9.22%, on average.

The long-term earnings growth rate for Portland General Electric Company is pegged at 5.14%. It has a trailing four-quarter earnings surprise of 7.74%, on average.

Huaneng Power International’s long-term earnings growth rate stands at 13.14%. The Zacks Consensus Estimate for 2020 earnings has been revised 20.81% upward over the past 30 days.

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