PPL Corp. :PPL-US: Earnings Analysis: Q4, 2016 By the Numbers : February 2, 2017

PPL Corp. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of PPL Corp. – American Electric Power Company, Inc. and NextEra Energy, Inc. (AEP-US and NEE-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 1832 million, Net Earnings of USD 465 million.
  • Gross margins widened from 37.92% to 42.90% compared to the same period last year, operating (EBITDA) margins now 51.75% from 48.31%.
  • Year-on-year change in operating cash flow of 13.01% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 1832 1889 1785 2011 1780
Revenue Growth (%YOY) 2.92 0.59 0.22 -41.74 -55.75
Earnings (mil) 465 472 482 479 404
Earnings Growth (%YOY) 15.1 19.8 93.57 -25.62 -26.14
Net Margin (%) 25.38 24.99 27 23.82 22.7
EPS 0.68 0.69 0.71 0.71 0.59
Return on Equity (%) 18.72 18.6 19.2 19.47 16.05
Return on Assets (%) 4.87 4.87 4.93 4.91 4.11

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Market Share Versus Profits

Revenues History
Earnings History

PPL-US‘s change in revenue this period compared to the same period last year of 2.92% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that PPL-US is holding onto its market share. Also, for comparison purposes, revenues changed by -3.02% and earnings by -1.48% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 37.92% to 42.90% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 48.31% to 51.75% compared to the same period last year. For comparison, gross margins were 45.63% and EBITDA margins were 55.16% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

PPL-US‘s change in operating cash flow of 13.01% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 34.66% to 38.97% and (2) one-time items. The company’s pretax margins are now 32.91% compared to 24.61% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

PPL Corp. is a holding company, which engages in the generation, transmission, and distribution of electricity and sale of gas. It operates through the following segments: United Kingdom (U.K.) Regulated, Kentucky Regulated, and Pennsylvania Regulated. The company was founded in 1920 and is headquartered in Allentown, PA.

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