Acknowledging they're well below street expectations for PPL Corporation (NYSE:PPL), FBR Capital still say it's a stock investors need to be cautious with them going forward. They maintain a "Market Perform" rating on them.
"We left the PPL earnings call with a slight case of indigestion. It would appear that hedges for 2011 and 2012 had more wiggle room than we assumed. No doubt, this will be the subject of numerous notes today. However, what we believe could be missing from the dialogue is the magnitude of the earnings contribution from the Kentucky utilities in 2011. This could be a key risk and we are well below street expectations in this respect. The basis for our view is enclosed. The new disclosure on the hedges, Kentucky earnings power, and other headwinds for next year leave us cautious on this stock. That said, we still see about $28 of intrinsic value for PPL based on our sum of the parts," said FBR.
FBR closed Friday at $26.86, gaining $0.42, or 1.59 percent. The price target was lowered to $28 a share.
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