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American Electric Power (AEP) Up 7.2% Since Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for American Electric Power Company, Inc. AEP. Shares have added about 7.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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.

American Electric Power Beats Q4 Earnings Estimates

American Electric Power reported fourth-quarter 2016 operating earnings of $0.67 per share, beating the Zacks Consensus Estimate of $0.55 by 21.8%.

Earnings also improved 39.6% year over year, supported by continued strategic investments in its regulated segments.

For 2016, American Electric Power’s earnings were $3.94 per share, up from $3.69 a year ago.

Total Revenue

American Electric Power’s fourth-quarter revenues of $3,782.6 million increased 2.4% from $3,692.7 million in the year-ago quarter. The reported figure also exceeded the Zacks Consensus Estimate of $2,831 million.

In 2016, total revenues decreased 3.1% year over year to $16,370.2 million.

Quarterly Highlights

Operating expenses incurred in the reported quarter were $1,851.7 million compared with $1,922.8 million a year ago.

Operating income in fourth-quarter 2016 was $571.3 million, up 15.6% from $494.1 million a year ago.

Segmental Performance

Vertically Integrated Utility Operations: Operating earnings in the quarter increased to $150.6 million from $116.8 million a year ago.

Transmission & Distribution Utilities: Operating earnings were $77.2 million in the quarter, up from $63.9 million a year ago.

AEP Transmission Holdco: This segment generated an operating income of $58.8 million, up from $44.6 million recorded in the fourth quarter of 2015.

Generation and Marketing: Operating earnings were $47.8 million, up from $7.8 million in the fourth quarter of 2015.

Financial Update

As of Dec 31, 2016, American Electric Power had $210.5 million in cash and cash equivalents compared with $176.4 million as of Dec 31, 2015.

Long-term debt was $17.38 billion as of Dec 31, 2016, compared with $17.74 billion as of Dec 31, 2015.

Cash flow from operations was $4.5 billion for 2016 compared with $4.7 billion in the prior year.


American Electric Power has provided its 2017 operating earnings guidance in the range of $3.55–$3.75.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted 5.23% downward due to these changes.

American Electric Power Company, Inc. Price and Consensus


American Electric Power Company, Inc. Price and Consensus | American Electric Power Company, Inc. Quote

VGM Scores

At this time, American Electric Power's stock has a subpar Growth Score of 'D',however its Momentum is doing a bit better with a 'C'. 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 aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.


Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Interestingly, the stock has a a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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