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American Electric Power (AEP)
NASDAQ:AEP
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American Electric Power
(NASDAQ:AEP)
73Outperform
Positive Factors
Financial Performance
The reaffirmation of AEP's financial outlook indicates confidence in the company's future performance.
Growth Outlook
AEP's growth outlook is driven by an investment program focused on supply decarbonization and transmission, supporting a premium valuation.
Strategic Positioning
With equity requirements fulfilled for its plan, focus is expected to turn to macro-related issues, potentially enhancing strategic positioning.
Negative Factors
Regulatory Challenges
The first rate case for the new management team in West Virginia was dismissed due to a 'formatting issue.'
Regulatory Delays
Rate cases in Ohio can take between 14-25 months to get resolved.
American Electric Power (AEP) vs. S&P 500 (SPY)
Market Cap
$59.38B
Dividend Yield3.38%
Average Volume (3M)5.03M
Price to Earnings (P/E)19.1
Beta (1Y)0.14
Revenue Growth2.76%
EPS Growth31.53%
CountryUS
Employees16,330
SectorUtilities
Sector Strength88
IndustryRegulated Electric
Share Statistics
EPS (TTM)5.59
Shares Outstanding556,536,700
10 Day Avg. Volume3,562,968
30 Day Avg. Volume5,034,187
Financial Highlights & Ratios
PEG Ratio0.61
Price to Book (P/B)N/A
Price to Sales (P/S)2.84
Price to Cash Flow (P/CF)8.10
P/FCF Ratio8.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$107.36Price Target Upside0.58% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering11
American Electric Power Business Overview & Revenue Model
Company DescriptionAmerican Electric Power Company, Inc., an electric public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers in the United States. It operates through Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing segments. The company generates electricity using coal and lignite, natural gas, nuclear, hydro, solar, wind, and other energy sources. It also supplies and markets electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants. American Electric Power Company, Inc. was incorporated in 1906 and is headquartered in Columbus, Ohio.
How the Company Makes MoneyAEP generates revenue through several key streams. Primarily, the company earns money by selling electricity to residential, commercial, and industrial customers within its service territories. Revenue is largely driven by the regulated rates approved by state utility commissions. Additionally, AEP generates income through transmission and distribution services, which involve delivering electricity from power plants to end-users via its extensive network of power lines and substations. The company also engages in wholesale electricity markets, selling surplus power to other utilities or energy marketers. Furthermore, AEP invests in renewable energy projects and energy efficiency solutions, which contribute to its revenue through government incentives and customer programs. Strategic partnerships and joint ventures in energy infrastructure development also play a role in enhancing AEP's earnings.
American Electric Power Financial Statement Overview
Summary
American Electric Power exhibits a solid financial performance with strong revenue growth and profitability. The income statement shows effective cost management and profitability, while the balance sheet indicates moderate leverage. Cash flow improvements are promising, although there is room to enhance equity financing.Income Statement
American Electric Power has shown a strong income statement performance with a consistent growth in total revenue over the years. The gross profit margin is robust, reflecting efficient cost management. The net profit margin is healthy, indicating profitability. The EBIT and EBITDA margins are solid, demonstrating effective operational performance. The revenue growth rate from 2023 to 2024 is positive, further underscoring the company's ability to enhance its top line.75
Positive
Balance Sheet
The balance sheet reveals a moderate debt-to-equity ratio, suggesting a balanced approach to leveraging. However, the equity ratio is relatively low, indicating a higher reliance on liabilities to finance assets. The return on equity is decent, showing the company's ability to generate returns on shareholders' investments. The overall stability of the balance sheet is acceptable, but there is room for improvement in equity financing.60
Neutral
Cash Flow
Cash flow analysis highlights a significant improvement in free cash flow in 2024, indicating enhanced cash generation capabilities. The operating cash flow to net income ratio is strong, pointing to effective conversion of income into cash. Despite past negative free cash flow figures, the recent turnaround is a positive sign. The free cash flow to net income ratio has improved, showcasing better cash management practices.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 19.72B | 18.98B | 19.64B | 16.79B | 14.92B | Gross Profit |
| 12.46B | 11.13B | 11.29B | 10.20B | 9.54B | EBIT |
| 4.30B | 3.56B | 3.48B | 3.41B | 2.99B | EBITDA |
| 8.10B | 7.20B | 7.10B | 6.76B | 6.22B | Net Income Common Stockholders |
| 2.97B | 2.21B | 2.31B | 2.49B | 2.20B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 418.30M | 544.40M | 696.90M | 623.80M | 593.50M | Total Assets |
| 103.08B | 96.68B | 93.47B | 87.67B | 80.76B | Total Debt |
| 45.76B | 43.61B | 40.40B | 36.66B | 34.43B | Net Debt |
| 45.56B | 43.28B | 39.89B | 36.26B | 34.04B | Total Liabilities |
| 76.09B | 71.40B | 69.35B | 64.99B | 59.98B | Stockholders Equity |
| 3.90B | 25.25B | 23.89B | 22.43B | 20.55B |
| Cash Flow | Free Cash Flow | |||
| 6.66B | -2.49B | -1.48B | -1.92B | -2.48B | Operating Cash Flow |
| 6.80B | 5.01B | 5.29B | 3.84B | 3.83B | Investing Cash Flow |
| -7.60B | -6.27B | -7.75B | -6.43B | -6.23B | Financing Cash Flow |
| 659.20M | 1.08B | 2.57B | 2.61B | 2.41B |
American Electric Power Technical Analysis
Positive
106.74
Price Trends
105.16
Positive
99.99
Positive
98.21
Positive
Market Momentum
0.63
Negative
53.23
Neutral
77.51
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AEP, the sentiment is Positive. The current price of 106.74 is above the 20-day moving average (MA) of 105.92, above the 50-day MA of 105.16, and above the 200-day MA of 98.21, indicating a bullish trend. The MACD of 0.63 indicates Negative momentum. The RSI at 53.23 is Neutral, neither overbought nor oversold. The STOCH value of 77.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AEP.
American Electric Power Risk Analysis
American Electric Power disclosed 45 risk factors in its most recent earnings report. American Electric Power reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
American Electric Power Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $93.71B | 21.22 | 9.10% | 3.43% | 4.46% | 54.09% | |
77 Outperform | $100.17B | 22.80 | 13.61% | 3.16% | 5.83% | 10.23% | |
73 Outperform | $59.38B | 19.11 | 11.37% | 3.38% | 2.76% | 31.53% | |
73 Outperform | $70.10B | 26.52 | 5.18% | 4.82% | -3.25% | -76.46% | |
72 Outperform | $46.77B | 18.89 | 9.34% | 3.29% | 5.98% | 4.99% | |
64 Neutral | $45.47B | 21.89 | 7.91% | 5.01% | -10.79% | 18.04% | |
63 Neutral | $8.57B | 12.25 | 6.36% | 4.41% | 3.08% | -9.36% |
* Utilities Sector Average
Performance Comparison
AEP
American Electric Power
106.74
24.64
30.01%
D
Dominion Energy
52.95
4.85
10.08%
DUK
Duke Energy
119.85
25.78
27.41%
EXC
Exelon
46.22
10.34
28.82%
NGG
National Grid Transco
72.26
13.54
23.06%
SO
Southern Co
90.43
19.67
27.80%
American Electric Power Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: 4.29% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Positive
The earnings call was largely positive with strong financial performance, significant load growth, and a solid capital plan. However, there are challenges related to higher operational costs, ongoing regulatory uncertainties, and impacts on credit metrics that need to be addressed.Highlights
Strong Operating Earnings
Fourth quarter 2024 operating earnings were reported at $1.24 per share, with full-year 2024 operating earnings totaling $5.62 per share, representing a 7% year-over-year increase from $5.25 per share in 2023.
Significant Load Growth
Commercial load growth of 12.3% over the fourth quarter and 10.6% growth on the full year compared to 2023, driven by data center demand.
Large Capital Plan
AEP has a robust $54 billion capital plan for 2025-2029, with potential incremental investment opportunities of up to $10 billion.
Successful Transactions
The Ohio and INM minority interest transaction valued at $2.82 billion is highly accretive, and AEP sold the New Mexico Renewable Development solar portfolio, generating almost half a billion dollars in net cash proceeds in 2024.
Dividend Increase
AEP increased the quarterly dividend from $0.88 to $0.93 per share in October 2024.
Positive Regulatory Developments
Constructive base rate case outcomes in multiple states and commission approvals for various plans, enhancing financial credibility.
Lowlights
Higher Costs Impacting Margins
Higher O&M costs and lower margins at the generation and marketing segment partially offset favorable drivers in earnings.
Uncertainty in Tariff Settlements
Ongoing discussions and uncertainty regarding data center tariff settlements, particularly in Ohio, could impact financial outcomes.
Deferred Fuel Balance Impact on Credit Metrics
Moody's revision on deferred fuel calculation may affect FFO to debt ratios, potentially dropping them by 40-60 basis points.
Regulatory Challenges in West Virginia
The proposed securitization option is not included in current financial plans, leading to potential uncertainties in customer affordability strategies.
Company Guidance
During the American Electric Power Company's fourth quarter 2024 earnings call, the company provided several key metrics and guidance for the upcoming years. AEP announced fourth quarter operating earnings of $1.24 per share, equating to $660 million, and total 2024 operating earnings of $5.62 per share. The company reaffirmed its 2025 operating earnings guidance range of $5.75 to $5.95 per share, supported by an anticipated long-term operating earnings growth rate of 6% to 8%. AEP's strategic focus includes a robust $54 billion capital plan from 2025 to 2029, aimed at enhancing their transmission and distribution infrastructure and supporting significant load growth, especially from data centers and industrial customers. The company reported commercial load growth of 12.3% in the fourth quarter and 10.6% for the full year compared to 2023. AEP also highlighted a pending $2.82 billion minority interest transaction on their transmission business, expected to close in the second half of 2025, which is anticipated to be highly accretive at 2.3 times rate base and valued at 30.3 times price to earnings. The transaction is aimed at rotating capital into investments that benefit customers and support growing energy demand.American Electric Power Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
American Electric Power’s CIO Announces Resignation
Neutral
Mar 20, 2025
On March 17, 2025, Therace M. Risch, the Executive Vice President and Chief Information and Technology Officer of American Electric Power Company, Inc., announced her resignation effective April 1, 2025. This leadership change may impact the company’s operations and strategic direction in the technology and information domains.
Executive/Board ChangesShareholder Meetings
American Electric Power Director Announces Departure
Neutral
Feb 19, 2025
On February 18, 2025, Donna A. James, a member of American Electric Power Company’s Board of Directors, announced she would not stand for re-election at the 2025 Annual Meeting of Shareholders for personal reasons, not due to any disagreements with the company. This decision is expected to have no negative impact on the company’s operations or policies, ensuring stability in its governance and ongoing activities.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.