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TheStreet Open House

Why PPL (PPL) Stock Is Down Despite A Ratings Upgrade

NEW YORK (TheStreet) -- PPL (PPL) shares are down -2.5% to $33.82 following news that it is spinning off its power plant unit.

Shares are falling despite Bank of America's (BAC) improved outlook on the company's price target. The firm today raised its target to $39 from $36 while reiterating its "buy" rating.

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The new company will be named Talen Energy and PPL Corp shareholders will own 65% of Talen, with Riverside Holdings owning the other 35% upon the closing of the deal.

The new company will be one of the largest independent power producers in the country with more than 15,000 megawatts of generating capacity in multiple markets in the U.S.

TheStreet Ratings team rates PPL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PPL CORP (PPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for PPL CORP is currently very high, coming in at 85.64%. It has increased significantly from the same period last year. Along with this, the net profit margin of 24.53% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 281.55% to $931.00 million when compared to the same quarter last year. In addition, PPL CORP has also vastly surpassed the industry average cash flow growth rate of 18.17%.
  • PPL CORP's earnings per share declined by 24.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, PPL CORP reported lower earnings of $1.74 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($2.23 versus $1.74).
  • The revenue fell significantly faster than the industry average of 10.4%. Since the same quarter one year prior, revenues fell by 47.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: PPL Ratings Report
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