PPL Stock Underperforms Industry in Six Months: How to Play?

PPL Corporation’s PPL shares have declined 11% in the past six months, wider than the Zacks Utility-Electric Power industry’s decline of 8.7%. The company also underperformed the Zacks Utilities sector in the same time frame.

PPL reported a negative earnings surprise in the last reporting quarter due to an increase in operating expenses. PPL faces increasing competition in the transmission market, which could weigh on operational performance, while unexpected disruptions may negatively impact its financial results.

Yet, the company is benefiting from growing data center demand, particularly in Pennsylvania and Kentucky, where these energy-intensive facilities are driving higher electricity consumption.

Price Performance (Six months)

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Another operator in the same space, FirstEnergy Corp. FE, is making a substantial investment to strengthen its infrastructure to provide reliable services to customers. The company’s shares have declined 9.1% in the past six months.

Does PPL’s recent share-price weakness offer investors an attractive entry point? Let us examine the key factors that could determine whether PPL stock is worth adding to a portfolio at current levels.

Factors That Could Strengthen PPL’s Growth Outlook

PPL continues to benefit from rising large-load demand, which is expected to support electricity consumption and infrastructure investment over the coming years. In Pennsylvania, advanced-stage data center demand increased 12% sequentially to 31.8 gigawatts (“GW”) in the second quarter of 2026. In Kentucky, the economic development pipeline expanded to 13.7 GW through 2032, including 11.6 GW from data centers, while signed reimbursement agreements climbed to 1.3 GW from 0.9 GW in the first quarter.

PPL plans to invest $23 billion in regulated infrastructure during 2026-2029, including $5.1 billion in 2026. These investments are aimed at strengthening system reliability, modernizing infrastructure and supporting carbon-emission reduction efforts. The capital plan is expected to drive average annual rate base growth of 10.3% through 2029 and does not include potential contributions from Invitium Energy. The program remains a key pillar of PPL’s regulated growth strategy over the current planning period.

More than 60% of PPL’s capital investment plan qualifies for “contemporaneous recovery,” which mitigates the effects of regulatory lag on earnings. This expedited recovery of capital expenditures enables the company to efficiently fund its long-term projects.

PPL remains focused on disciplined cost management to create value for both customers and shareholders. Management estimates that every $1 of O&M savings can support roughly $8 of capital investment without raising customer bills. The company achieved $170 million in annual run-rate O&M savings in 2025 and is targeting $175 million of O&M reductions in 2026 compared with 2021 levels. These efficiencies should help PPL maintain competitive utility rates, support affordability and enhance its ability to attract and retain customers.

Headwinds for PPL Stock

PPL continues to encounter competition in Pennsylvania's transmission market. Moreover, adverse weather conditions, cybersecurity incidents, equipment outages and fuel supply interruptions could disrupt operations and pressure the company's earnings and profitability.

PPL Stock’s Earnings Estimate Moving Up

PPL expects 2026 earnings to be in the range of $1.90-$1.98 per share. The Zacks Consensus Estimate for PPL’s 2026 and 2027 earnings per share indicates year-over-year growth of 7.18% and 8.32%, respectively.

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The Zacks Consensus Estimate for FE’s 2026 and 2027 earnings per share indicates year-over-year growth of 7.45% and 7.74%, respectively.

PPL’s Long-term Debt to Capital

Utility operations are capital-intensive, and companies in this sector often need to borrow to fund long-term projects when internal resources are insufficient. The company is also borrowing funds to meet its capital requirements.

PPL’s current long-term debt to capital is 56.81% compared with its industry average of 54.37%. This shows the company is utilizing more long-term debt than peers to run its operations.

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Another utility, Exelon Corporation EXC, is making substantial investments to strengthen its transmission and distribution lines to provide reliable services to its customers. Currently, debt to capital of Exelon is pegged at 63.06%, which is higher than its industry peers.

PPL Stock Trades at a Premium

PPL Corporation is currently valued at a premium compared with its industry on a forward 12-month P/E basis. The stock is trading at a P/E F12M of 16.8X compared with its industry’s 15.29X.

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Exelon is currently trading at a P/E F12M of 14.71X, a discount compared with its industry at a P/E F12M of 15.29X.

PPL’s Return Is Lower Than the Industry

Return on equity (“ROE”) is a financial ratio that measures how well a company uses its shareholders’ equity to generate profits. The current ROE of the company indicates that it is using shareholders’ funds more efficiently than peers.

PPL’s trailing 12-month ROE is 9.33%, lower than the industry average of 11.4%.

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PPL’s Net Margin Lower Than Industry

Net margin measures the percentage of revenues retained as profit after deducting all expenses, taxes and interest. PPL’s net margin is currently pegged at 14.74% compared with the industry’s 15.81%.

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Rounding Up

PPL Corporation is strengthening its grid through major infrastructure investments, IT modernization and an expanded $23 billion capital expenditure plan, which will assist in improving system reliability and resilience. The company is also benefiting from rising data center-driven load growth and timely rate recovery, which enables it to efficiently fund the long-term projects. PPL currently has Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, PPL Corporation is currently trading at a premium valuation, while its returns and net margin remain below the industry averages. Given these concerns, investors may prefer to wait now and look for a more attractive entry point.

 

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This article originally published on Zacks Investment Research (zacks.com).

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