PPL Stock is Trading at a Premium: Should You Buy, Hold or Sell?

Core Viewpoint - PPL Corporation is positioned favorably in the utility sector with a premium valuation due to its constructive regulatory environment and increasing demand from data centers in its service regions [1][2]. Investment and Infrastructure - PPL plans to invest $20 billion through 2028 to enhance its infrastructure and mitigate outages [2][10]. - Over 60% of PPL's capital investment plan is subject to "contemporaneous recovery," which helps reduce regulatory lag on earnings [10]. Performance Metrics - PPL's shares have increased by 8.2% over the past three months, outperforming the industry average of 5% and the Zacks Utilities sector's return of 4.5% [5]. - The company registered year-over-year electric sales volume increases of 1.1% in Pennsylvania and 1.2% in Kentucky for 2024 [9]. Demand Drivers - The interest from data centers in Pennsylvania and Kentucky is significant, with new requests projected to reach 48 gigawatts (GW) and 6 GW, respectively, from 2026 to 2034 [8]. - New data center connections are expected to lower transmission costs for retail customers, enhancing PPL's service appeal [9]. Earnings and Dividends - PPL's expected EPS for 2025 is between$ 1.75 and $1.87, with a Zacks Consensus Estimate of$ 1.82 per share, indicating year-over-year growth of 7.69% for 2025 and 7.93% for 2026 [12][15]. - The company aims to increase its dividend per share by 6-8% annually through 2027, with a current annual dividend of $1.09 and a yield of 3.13% [15]. Profitability and Efficiency - PPL's trailing 12-month return on equity (ROE) is 8.88%, which is below the industry average of 9.75% [16]. - The company is implementing cost-saving initiatives expected to reduce expenses by at least$ 175 million by 2026 [11]. Strategic Outlook - PPL's focus on clean energy production and grid strengthening is anticipated to enhance service reliability [18]. - The company's operational management and favorable regulatory conditions contribute positively to its strategic positioning [18].