American Electric Power Faces Challenges Amidst Mixed Earnings
American Electric Power Company, Inc. (AEP) based in Columbus, Ohio, has a market cap of $49.9 billion and supplies electricity to over 5.5 million customers across the U.S. The company employs a varied energy mix that includes coal, natural gas, renewable sources, and nuclear power.
Stock Performance Compared to Peers
AEP shares have struggled in the past year, rising only 25.9% compared to the S&P 500 Index ($SPX), which has gained 30.4% in the same period. As of 2024, AEP has increased by 18.6%, while the SPX achieved a 23.1% gain year-to-date (YTD).
Further analysis shows AEP lagging behind the Utilities Select Sector SPDR Fund’s (XLU) 28.3% return in the last year and a 25.1% gain YTD.
Mixed Earnings Results Raise Concerns
In the third quarter, AEP reported adjusted EPS of $1.85 and revenue of $5.4 billion, both above analyst expectations. However, on November 6, shares fell by 4.1% due to worries about a narrower 2024 EPS guidance of $5.58 – $5.68, which indicated limited growth. Additional concerns arose from a drop in GAAP EPS and a 1% decrease in electricity sales from Vertically Integrated Utilities, reflecting operational difficulties. A significant 6.1% increase in interest expenses also contributed to negative sentiment surrounding the stock.
Future Forecasts and Analyst Opinions
For the current fiscal year ending December, analysts project AEP’s EPS to grow 7.1% year-over-year to $5.62. AEP has seen mixed results in past earnings surprises, beating consensus estimates in two of the last four quarters while falling short in the other two. Among the 20 analysts monitoring the stock, the consensus rating stands at a “Moderate Buy,” comprised of six “Strong Buy” ratings, one “Moderate Buy,” 11 “Holds,” one “Moderate Sell,” and one “Strong Sell.”
Price Target Adjustments
On November 7, Scotiabank adjusted American Electric’s price target to $105 but retained an “Outperform” rating, expressing optimism about growth prospects despite current challenges and investor worries regarding regulatory and balance sheet matters.
As of now, AEP is trading below the average price target of $102.50, with the highest forecast at $113, suggesting a potential upside of 17.3%.
On the date of publication, Sohini Mondal did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. Please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
