AEP shares target raised by BMO Capital on Texas settlement

Published 30/07/2024, 02:58 am
AEP
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BMO Capital Markets has updated its outlook on American Electric Power (NASDAQ: NASDAQ:AEP), increasing the stock's price target to $104 from the previous $100 while maintaining an Outperform rating.

The agreement, which was filed last Thursday and met no opposition, would allow AEP Texas to implement a net combined distribution and transmission rate increase of approximately $70 million.

The figure is roughly 54% of the $130 million net revenue increase initially requested by the company.

The settlement endorses a slightly higher Return on Equity (ROE) of 9.76% while keeping the equity layer constant at 42.5%, as opposed to the 10.6% ROE and 45% equity layer sought in AEP Texas's original proposal. The analyst at BMO Capital noted that these terms support their decision to maintain the Outperform rating for American Electric Power.

Recently, American Electric Power reached a settlement concerning derivative actions filed by four shareholders, which includes a $450,000 payment for attorneys' fees and the implementation of certain corporate governance reforms.

The company also recently issued $1 billion in junior subordinated debentures, consisting of two series due in 2054. Analysts have shown mixed reactions to these developments, with Ladenburg Thalmann upgrading AEP's stock from Sell to Neutral, while UBS Securities downgraded it from Neutral to Sell.

BMO Capital Markets has projected AEP's earnings per share to be $5.59 for 2024, $5.97 for 2025, and $6.35 for 2026, lining up with AEP's reaffirmed 2024 operating earnings guidance.

InvestingPro Insights

In light of BMO Capital Markets' updated outlook on American Electric Power (NASDAQ:AEP), reviewing real-time data and insights from InvestingPro can provide additional context for investors. As of the last twelve months leading up to Q1 2024, AEP has demonstrated a stable financial position with a market capitalization of $50.84 billion and a P/E ratio of 17.71. Notably, the company's dividend yield stands at 3.65%, reflecting a 6.02% growth in dividends, which aligns with AEP's history of raising its dividend for 14 consecutive years and maintaining payments for 54 consecutive years.

InvestingPro Tips suggest that while AEP operates with a significant debt burden, it trades with low price volatility and is currently trading near its 52-week high. The stock's recent performance has seen a large price uptick over the last six months, with a year-to-date price total return of 21.3%. Analysts predict the company will be profitable this year, a sentiment supported by AEP's profitability over the last twelve months. For investors seeking a deeper analysis, InvestingPro offers additional tips and metrics, which could further inform investment decisions. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and explore the 11 additional InvestingPro Tips available for AEP at: https://www.investing.com/pro/AEP.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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