PPL Corp. (PPL) reported first quarter 2010 earnings from continuing operations of 94 cents per share, beating the Zacks Consensus Estimate of 90 cents and last year’s profit of 60 cents. The better-than-expected earnings during the quarter were due to higher wholesale electricity margins in the company’s energy supply business, partially offset by lower earnings in the regulated electric delivery businesses in Pennsylvania and United Kingdom.

Segment Results

In the reported quarter, earnings from PPL’s Supply segment improved by 42 cents per share (191%) over the last year, while earnings from the Pennsylvania Delivery and the International Delivery businesses declined by 4 cents per share each, or 29% and 17%, respectively. The increase in Supply segment earnings was primarily due to significantly higher eastern base-load generation pricing.

Earnings decline at Pennsylvania Delivery business is attributed to higher operation and maintenance costs, lower distribution margins as a result of continued slow economic growth, milder weather and customers’ reduced consumption of electricity. International Delivery business’ results were affected by higher financing costs, higher U.K. income taxes, and higher pension costs.  

Revenue

Net revenues in the quarter decreased 29% to $3,033 million compared with $2,344 million in the year-ago period.

Outlook

Despite ongoing pressures of declining energy prices, lower electricity demand and lingering economic uncertainty, on the sector, PPL reaffirmed its 2010 ongoing earnings guidance in the range of $3.10 to $3.50 per share. On a GAAP basis, the company expects earnings in the range of $2.82 to $3.22 per share. The company’s forecast does not reflect any impact of the recently announced agreement to acquire E.ON U.S. LLC, including the required financing related to that acquisition.

Furthermore, the company remains positive on its hedge programs executed for 2010 and expects them to provide greater earnings and cash flow predictability. The company has hedged nearly 100% of its expected base-load generation output for 2010 and forecasts strong growth in 2010 energy margins based on hedged power and fuel prices, as well as hedged capacity prices in the PJM Interconnection.
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