AEP: Management Guidance and Brokers’ Price Targets

American Electric Power: Mild Weather Subdues Its Earnings

(Continued from Prior Part)

American Electric Power: Outlook

American Electric Power’s (AEP) management reaffirmed its fiscal 2016 earnings guidance of $3.60–$3.80 per share. Weather experts have already forecasted normal weather conditions this year, which may support AEP’s earnings. Also, its intention of divesting its Merchant Generation segment can also provide earnings stability.

American Electric Power’s $15 billion capital spending plan is of paramount importance to its regulated transmission. This is expected to improve its rate base significantly and may bode well for its future growth.

AEP’s dividends are expected to grow in line with its earnings. Earnings growth is projected to be 4%–6% in the next couple of years. In 2015, AEP’s dividends increased by 5.7% compared to 2014. AEP forms 1.2% of the iShares Select Dividend ETF (DVY).

Price targets

According to Wall Street analysts’ estimates, American Electric Power (AEP) has a price target of $67.40 against its current market price of $63.50. This implies a possible upside of 6% in one year.

Of the 24 analysts tracking American Electric Power, ten recommend it as a “hold,” while 14 recommend it as a “buy.” None of the analysts recommended it as a “sell” as of May 2, 2016.

Among AEP’s peers, Dominion Resources (D) has a price target of $77.30 against its market price of $71.50. The possible maximum implied upside at this point is 8% in the next year. Exelon (EXC) has a one-year price target of $36.50, implying an upside of ~4% with its market price of $35.00. Peer Duke Energy (DUK) has an estimated upside of 1.2% and a price target of $79.60. DUK is currently trading at $78.80.

Browse this series on Market Realist:

• Part 1 - American Electric Power’s 1Q16 Earnings: EPS Fell by 20%

• Part 2 - What Does American Electric Power’s Current Valuation Indicate?