In a report released yesterday, Ross Fowler from Bank of America Securities reiterated a Buy rating on American Electric Power (AEP – Research Report), with a price target of $114.00.
Ross Fowler has given his Buy rating due to a combination of factors that suggest American Electric Power (AEP) has a promising path towards a premium valuation. The company’s significant capital expenditure plans, particularly the potential expansion of their high-voltage 765kv system in Ohio and Indiana, as well as opportunities in Texas, indicate substantial growth prospects. Additionally, the new management team inspires confidence, with a high probability of integrating a significant portion of $10 billion incremental capex into an already strong $57 billion capital deployment plan.
Furthermore, AEP is making strides in improving its earned return on equity (ROE), with expectations of reaching 9.3% in 2025. The resolution of major rate cases has reduced regulatory exposure, and a large portion of the planned rate-related revenue increase has been approved, supporting near-term earnings. Legislative developments in Ohio and Virginia could further enhance earnings and balance sheet strength. The price objective has been adjusted to $114, reflecting these positive factors and a group average 2026 P/E multiple of 17.1x.
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