AEP Guides for 2012 and More - Analyst Blog
14 February 2012 - 1:30AM
Zacks
American Electric Power Company Inc. (AEP)
provided an update on its earnings and capital spending plans for
the period 2012-2014. The company had posted its fourth and fiscal
2011 results last month.
American Electric Power expects pro forma earnings in the range
of $3.05 to $3.25 per share for fiscal 2012. Over the next few
years, the company expects earnings growth to be in the range of 4%
to 6% driven by investment in regulated operations, a refocus on
transmission business and capital expenditure on regulated
generating fleet to comply with new regulations from the U.S.
Environmental Protection Agency.
In 2012, the company expects capital expenditure of $3.1 billion
and in the range of $3.5 billion to $3.7 billion for the years 2013
and 2014.
Meanwhile, the company plans to create two sustainable
businesses out of its Ohio assets, a competitive generation company
and a regulated wires company. It has received approval from the
Public Utilities Commission of Ohio for the corporate separation of
its Ohio generation assets. It also plans to file with Federal
Energy Regulatory Commission for the separation and termination and
replacement of the Interconnection Agreement for its eastern
generating assets with a new power cost sharing arrangement. It
expects a decision by the first quarter of 2013.
American Electric Power believes that economic fundamentals are
at best modest at the 11 states where it operates through its
operating subsidiaries and its generation and transmission
portfolios. It had reported fourth quarter ongoing earnings of 40
cents per share, in line with the Zacks Consensus Estimate. The
company’s results, however, came above the year-ago quarterly
earnings of 38 cents per share. In 2012, the company expects slight
year-over-year growth in the industrial and commercial sectors and
growth to remain flat year-over-year in the residential sector.
In fiscal 2011, the company generated approximately $3.8 billion
of cash from operating activities, compared with approximately $2.7
billion generated in fiscal 2010. Long-term debt decreased to $15.1
billion at the end of the reported fiscal from $15.5 billion at the
end of fiscal 2010. Given the numbers, the company believes that
its balance sheet is strong and is stable in the credit market as
well. It is confident that it has sufficient cash to support its
capital plan and does not feel the need for equity financing beyond
the company’s existing dividend reinvestment plan in the near
term.
Going forward, we believe that the company offers stable
earnings through consistent performance in core regulated
operations, growth through transmission network expansion and an
above-average dividend yield. However, tepid economies in a number
of its service states restrict opportunities for growth. Also,
uncertainty surrounding pending regulatory cases, its predominantly
fossil-fuel based generation assets and lower wholesale sales
continue to weigh on the stock.
Like its peer, Duke Energy Corporation (DUK),
the company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
stock.
AMER ELEC PWR (AEP): Free Stock Analysis Report
DUKE ENERGY CP (DUK): Free Stock Analysis Report
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