With a market cap of $49.9 billion, Columbus, Ohio-based American Electric Power Company, Inc. (AEP) specializes in the generation, transmission, and distribution of electricity across the U.S. Serving over 5.5 million customers, it utilizes a diverse energy mix including coal, natural gas, renewables, and nuclear.
Shares of the utility company have underperformed the broader market over the past 52 weeks. AEP stock has risen 25.9% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 30.4%. In 2024, shares of AEP are up 18.6%, compared to SPX's 23.1% gain on a YTD basis.
Looking closer, AEP has also lagged behind the Utilities Select Sector SPDR Fund's (XLU) 28.3% return over the past 52 weeks and a 25.1% YTD gain.
Despite reporting better-than-expected Q3 adjusted EPS of $1.85 and revenue of $5.4 billion, AEP's shares fell 4.1% on Nov. 6 due to concerns over the company's narrower 2024 EPS guidance of $5.58 - $5.68, signaling limited growth potential and falling below some expectations. Concerns were further fueled by a decline in GAAP earnings per share and a 1% drop in electricity sales from Vertically Integrated Utilities, pointing to operational challenges. Additionally, a 6.1% rise in interest expenses highlighted increasing cost pressures, dampening sentiment.
For the current fiscal year, ending in December, analysts expect AEP's EPS to grow 7.1% year-over-year to $5.62. The company's earnings surprise history is mixed. It beat the consensus estimates in two of the last four quarters while missing on two other occasions.
Among the 20 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on six “Strong Buy” ratings, one “Moderate Buy,” 11 “Holds,” one “Moderate Sell,” and one “Strong Sell.”
On Nov. 7, Scotiabank lowered American Electric's price target to $105 but maintains an “Outperform” rating, citing optimism about growth prospects despite a disappointing starting point and overdone investor concerns about regulatory and balance sheet issues.
As of writing, AEP is trading below the mean price target of $102.50. The Street-high price target of $113 implies a potential upside of 17.3%.
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