On Tuesday, BofA Securities adjusted its stance on American Electric Power (NASDAQ:AEP) stock, moving its rating from Neutral to Underperform. Accompanying this downgrade, the firm set a new price target for the utility company's shares at $97.00, a slight increase from the previous $96.00 target.
The decision comes after a thorough review of American Electric Power's second-quarter earnings for 2024. BofA Securities recalibrated their valuation model to align with a higher group multiple for the year 2026.
Despite the firm's earnings per share (EPS) estimates for American Electric Power being slightly above consensus for 2026, the firm believes that the company's stock is fully valued at its current level.
The analyst at BofA Securities expects the company to continue its current plan under the new CEO, which is anticipated to result in EPS figures that match the company's guidance. However, the analyst sees limited potential for near-term growth in the stock's value, prompting the downgrade.
Furthermore, BofA Securities has updated its EPS forecasts for American Electric Power for the years 2024, 2025, and 2026. The new estimates are $5.62, $5.97, and $6.34 respectively, each being a one-cent increase from the earlier projections of $5.61, $5.96, and $6.33. This adjustment is based on rate changes that the firm has identified.
The revised price target and EPS estimates reflect BofA Securities' latest expectations for American Electric Power's financial performance over the next few years. The new target of $97.00 suggests a conservative outlook for the stock's growth prospects according to the firm's analysis.
In other recent news, American Electric Power (AEP) reported an increase in its second-quarter earnings to $1.25 per share, a $0.12 rise from the previous year.
The company also reaffirmed its full-year operating earnings guidance, projecting a range of $5.53 to $5.73 per share and a long-term earnings growth rate of 6% to 7%.
Scotiabank and Mizuho Securities both adjusted their price targets for AEP, increasing them to $99 and $100, respectively, while maintaining their ratings.
AEP has secured substantial customer commitments, anticipating over 15 gigawatts of incremental load by the decade's end, largely driven by data center demand.
The company reported positive rate case developments in Indiana, Michigan, and Texas, and plans to file a base rate case in West Virginia. Despite a slight decline in residential load, AEP noted a significant 12.4% increase in commercial sales. These are the recent developments from AEP.
InvestingPro Insights
American Electric Power (NASDAQ:AEP) displays a mix of robust financial health and strategic growth, as reflected in the latest data from InvestingPro. With a market capitalization of $52.18 billion, the company stands as a significant player in the utility sector. The P/E ratio, a measure of a stock's value, is 19.66, indicating a reasonable valuation relative to near-term earnings growth. This aligns with one of the InvestingPro Tips, which highlights AEP's trading at a low P/E ratio in comparison to its expected earnings growth.
InvestingPro Data further reveals a modest revenue growth of 0.27% over the last twelve months as of Q2 2024, complemented by a stronger quarterly revenue growth of 4.73%. This suggests a steady financial trajectory for AEP. Moreover, the company has demonstrated a solid dividend track record, maintaining dividend payments for 54 consecutive years and experiencing a dividend growth of 6.02% in the same period. This commitment to shareholder returns is underscored by another InvestingPro Tip which notes that AEP has raised its dividend for 14 consecutive years.
For investors seeking stability, AEP's stock generally trades with low price volatility, an attribute that can be particularly appealing in uncertain market conditions. Additionally, analysts have revised their earnings upwards for the upcoming period, indicating potential optimism about the company's future performance. With 8 more InvestingPro Tips available, those interested in a deeper analysis can explore further insights on American Electric Power at https://www.investing.com/pro/AEP.
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