AEP Shares Edge Up on 2014-16 View

Zacks

Recently, American Electric Power Company Inc. (AEP) provided its earnings expectations as well as spending budgets for the next three years (2014-2016), lifting its shares price 1.8% to $47.10 on Nov 11, 2013.

The utility narrowed its operating guidance for 2014 and provided operating guidance for 2015 and 2016. It has also maintained its 2014 and 2015 capital budgets.

American Electric Power expects operating earnings to come in the band of $3.20–$3.40 per share for 2014 versus its prior projection of $3.15–$3.45 a share. The company forecast operating earnings of $3.30 to $3.60 a share for 2015 and $3.45 to $3.85 a share for 2016. The expectations are mainly based on results from its core regulated businesses.

During its third quarter earnings release, in October, American Electric Power, one of the largest electric utilities in the U.S., raised its low end of the 2013 operating earnings guidance to $3.15 to $3.25 per share from $3.05 to $3.25 per share.

The company’s third quarter 2013 operating earnings of $1.10 per share successfully came above the Zacks Consensus Estimate by 1.9%. The quarterly figure also improved 7.8% from the year-ago profit. This improved performance reflects positive returns from the investments made in the company’s regulated operations.

For its capital expenditure budget, American Electric Power reaffirmed its 2014 and 2015 capital outlay of $3.8 billion a year. For 2016 the capital investment budget remains flat at $3.8 billion. It also intends to spend almost $5 billion in transmission between 2014 and 2016 in AEP Transmission Holding Co. and through its regulated utility operating companies.

The company’s cost control initiatives, particularly overhead costs, are expected to yield results in the balance of the year. Following the separation of the Ohio generation assets from the Ohio wires business by year end, Ohio generation will begin operations by next year.

American Electric Power has a stable earnings base of approximately 5 million customers spread over 11 states. The utility is investing more capital in its regulated business to expand the stable earnings base. Furthermore, geographical diversity enables it to tap transmission opportunities with better returns, compared to its single-state utility peers.

American Electric Power carries a Zacks Rank #2 (Buy). Other stocks in the industry that are also worth considering are Alliant Energy Corp. (LNT), Brookfield Infrastructure Partners L.P. (BIP) and Edison International (EIX), all with a comparable Zacks Rank #2 (Buy).

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Read the Full Research Report on EIX
Read the Full Research Report on BIP
Read the Full Research Report on LNT


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