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Ameren (AEE) Up 1.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Ameren (AEE). Shares have added about 1.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ameren due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ameren Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Ameren Corporation’s first-quarter 2021 earnings of 91 cents per share from continuing operations exceeded the Zacks Consensus Estimate of 79 cents by 15.2%. Moreover, the reported figure rose 54.2% from 59 cents reported in the year-ago quarter.

The year-over-year bottom-line improvement can be attributed to new Ameren Missouri electric service rates, which became effective Apr 1, 2020, and higher Ameren Missouri electric retail sales driven by near-normal winter temperatures.

Total Revenues

Total revenues came in at $1,566 million in the reported quarter, which improved 8.8% year over year due to higher electric as well as natural gas revenues. Revenues also beat the Zacks Consensus Estimate of $1,538 million by 1.8%.

Highlights of the Release

Ameren’s total electricity sales volumes declined 5.4% to 17,655 million kilowatt-hours (kWh) compared with 18,671 million kWh witnessed in the year-ago quarter. However, gas volumes rose 6.9% to 77 million dekatherms.

Total operating expenses were $1,250 million, up 4.3% year over year.

The company’s interest expenses in the first quarter were $100 million compared with the prior-year quarter’s $93 million.

Segment Results

The Ameren Missouri segment reported operating income of $47 million in first-quarter 2021 against loss of $10 million recorded in the prior-year quarter. This year-over-year upside reflects new electric service rates effective Apr 1, 2020 and higher electric retail sales driven by near-normal winter temperatures in first-quarter 2021.

The Ameren Illinois Electric Distribution segment reported operating income of $46 million for first-quarter 2021 compared with $37 million registered in first-quarter 2020. The year-over-year improvement can be attributed to increased earnings on infrastructure investments and a higher allowed return on equity due to a higher projected average 30-year U.S. Treasury bond yield in 2021 compared to 2020.

The Ameren Illinois Natural Gas segment reported operating income of $75 million for first-quarter 2021 compared with $55 million generated in the prior-year quarter. This year-over-year improvement reflects a rate design change and higher delivery service rates that incorporated increased investments in infrastructure, both effective in late January 2021.

The Ameren Transmission segment reported operating income of $47 million in first-quarter 2021, flat year over year. The neutral outcome can be attributed to increased earnings on infrastructure investments, which was offset by the impact of a 2021 FERC order addressing the historical recovery of materials and supplies inventories.

Financial Condition

Ameren reported cash and cash equivalents of $6 million as of Mar 31, 2021, compared with $139 million registered at 2020-end.

As of Mar 31, 2021, long-term debt totaled $11,527 million compared with $$11,078 million as of Dec 31, 2020.

During the first quarter, cash outflow from operating activities amounted to $35 million against cash worth $290 million generated in the prior-year quarter.

Guidance

Ameren has reissued its 2021 guidance. The company continues to expect its earnings in the range of $3.65-$3.85 per share. Currently, the Zacks Consensus Estimate for 2021 earnings is pegged at $3.75 per share, in line with the midpoint of the guidance.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Ameren has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Ameren has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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