UPDATE: Tudor Pickering Downgrades PPL Corp (PPL) to Hold Due to UK Headwinds

(Updated - June 2, 2015 11:30 AM EDT)

Tudor Pickering downgraded PPL Corp (NYSE: PPL) from Buy to Hold with a price target of $34 (from $38). Analyst Neel Mitra thinks UK headwinds, including the exchange rate and earnings quality, will continue to weigh on the stock.

"PPL’s earnings growth is ~4% through 2017 despite growing ratebase at 7% through 2019. Despite strong ratebase growth, its UK utility earnings are flat through 2017 due to a change in regulatory regimes (more detail below) while the USD has been strengthening relative to the GBP for ~1 year," said Mitra.

The analyst added, "Beyond 2017 when the UK headwinds subside to some degree (earnings quality will still be an issue), PPL will see earnings/dividend grow at a similar pace as the rest of the regulated utility universe and deserves to trade with the group average. Currently, regulated utilities are trading at 14.6x 2017 EPS while PPL is trading at 13.8x. Applying the ’17 regulated utility group multiple to PPL’s ’17 EPS leads us to a $34/sh PT. PPL’s current dividend yield of 4.7% is significantly higher than the regulated utility average of 3.6% and provides an incentive for investors to wait for the UK issues to sort out over the next 2 years."

For an analyst ratings summary and ratings history on PPL Corp click here. For more ratings news on PPL Corp click here.

Shares of PPL Corp closed at $34.77 yesterday.

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