BMO Capital Markets has adjusted its outlook on shares of American Electric Power (NASDAQ: NASDAQ:AEP), increasing the price target to $109 from the previous $105, while maintaining an Outperform rating.
Last week, it was reported that American Electric Power had engaged bankers to explore the sale of a minority stake in its transmission companies (Transcos) located in Ohio, Indiana, and Michigan.
The potential sale could have implications for the company's earnings per share (EPS) and credit metrics, which are critical factors for such transactions.
The analyst at BMO Capital Markets noted that while the exact impact on EPS and credit metrics would be determined by the sale price, the move could be beneficial. It was suggested that even if the sale results in a slight decrease in EPS, it could still be seen as a positive step for the company.
This is because it may significantly reduce the need for American Electric Power's current equity financing program, which could, in turn, enhance the company's multiples and alleviate a major concern for investors.
American Electric Power reported an increase in second-quarter operating earnings to $1.25 per share, a $0.12 rise from the previous year. AEP 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%.
On the analyst front, BofA Securities downgraded AEP's stock from Neutral to Underperform, while Scotiabank and Mizuho Securities both raised their price targets. This follows positive rate case developments in Indiana, Michigan, and Texas, and plans for a base rate case filing in West Virginia.
InvestingPro Insights
Amid the strategic financial maneuvers by American Electric Power (NASDAQ:AEP), the latest data from InvestingPro provides a comprehensive view of the company’s financial health and market performance. With a solid market capitalization of $54.3B and a P/E ratio of 20.45, the company presents a stable investment profile. Notably, American Electric Power has demonstrated a commitment to rewarding shareholders, as evidenced by its track record of raising dividends for 14 consecutive years and maintaining dividend payments for 54 consecutive years, a testament to its financial resilience and management's confidence in the company's future.
Analysts have taken a bullish stance on the company, with seven analysts revising their earnings upwards for the upcoming period. This optimism is reflected in the company's recent performance, with a 16.62% price total return over the last three months and a robust year-to-date price total return of 29.5%. These figures underscore the company's strong market presence and may reassure investors of its growth potential.
For those seeking further insights, InvestingPro offers additional tips on American Electric Power, allowing investors to delve deeper into the company's financial nuances and market behavior. With more tips available, including analysis on the company's P/E ratio relative to near-term earnings growth and its low price volatility, investors can access a wealth of information to inform their investment decisions. Visit InvestingPro for a comprehensive suite of tips and metrics that can enhance your understanding of American Electric Power's investment potential.
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