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PPL Stock Still Reeling From Brexit, May Present A Good Entry Point

Although PPL Corp PPL 1.61% shares have underperformed since the Brexit vote, driven by concerns regarding the company’s U.K. subsidiary and the weaker British pound, Argus’ John Eade believes the concerns are overdone and the selloff presents an attractive buying opportunity.

Eade maintained a Buy rating on the company, while lowering the price target from $45 to $41.

Dividend

“The stock carries an above-peer-average dividend yield of about 4.3 percent, and further dividend growth, supported by regulated earnings, appears likely,” the analyst mentioned.

Eade also noted that the current yield spread to the 10-year Treasure continues to be attractive on a historical basis.

PPL raised its quarterly cash dividend in February from $0.3775 to $0.38, and the analyst expects further meaningful dividend growth going forward, supported by the earnings from the company’s regulated businesses.

Future Growth

“The company completed the spinoff of its competitive supply business in 2015 and now focuses solely on regulated businesses. We believe that these businesses will support steady earnings and dividend growth, and that investors are likely to award the shares higher multiples as earnings become more predictable,” Eade stated.

The EPS estimate for 2-17 has been lowered from $2.50 to $2.15 to reflect the impact of the weaker British pound.

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DateFirmActionFromTo
Sep 2016Wolfe ResearchUpgradesPeer PerformOutperform
Sep 2016Argus ResearchMaintainsBuy
Aug 2016JefferiesMaintainsHold

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