American Electric Power Company, Inc.’s AEP continues to benefit from its strong liquidity position, supported by revolving credit facility. This enables the company to finance strategic investments and expand renewable portfolio, thereby driving earnings.
Let’s discuss the factors that make this Zacks Rank #1 (Strong Buy) stock an appropriate pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Movement & Surprise History
In the past 12 months, American Electric Power’s shares have rallied 27.8% compared with the industry’s rise of 21% and Zacks S&P 500 composite’s 25.7%.
Its average four-quarter positive earnings surprise is 5%.
The Zacks Consensus Estimate for 2020 earnings is pegged at $4.40 per share on revenues of $16.77 billion. The bottom-line figure suggests a 5.38% increase on a year-over-year basis. Also, the top line calls for a 5.36% improvement on a year-over-year basis.
The company’s long-term (three to five years) earnings growth is pegged at 5.60%.
The company’s operations are geographically diverse, which enables it to generate high returns. American Electric Power plans to invest approximately $16.6 billion in its transmission and distribution business over the next four years. Its latest plan includes capital expenditure target of $2.2 billion in contracted renewables over the 2019-2023 period.
Dividend Yield & Return on Equity (ROE)
The company is rewarding its shareholders through steady dividend pay outs. Currently, it has a dividend yield of 3% compared with the Zacks S&P 500 composite’s 1.79% and the industry's 2.81%.
The company has ROE of 11.09%, higher than the industry’s average of 9.47%. This indicates the company’s efficiency in utilizing shareholders’ funds.
Other Key Picks
Some other top-ranked stocks in the same industry are The AES Corporation AES, Dominion Energy Inc D and Entergy Corporation ETR. The AES Corporation currently sports a Zacks Rank #1, while Dominion Energy and Entergy carry a Zack Rank of 2.
The AES Corporation, Dominion Energy and Entergy delivered average positive earnings surprises of 4.68%, 0.10% and 4.79%, respectively, in the last four quarters.
The long-term earnings growth rates for The AES Corporation, Dominion Energy and Entergy are pegged at 9.11%, 4.80% and 7%, respectively.
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