BMO Capital Markets has adjusted its price target on shares of American Electric Power (NASDAQ: NASDAQ:AEP), raising it to $114 from the previous figure of $109.
The firm has also reiterated its Outperform rating on the stock. The revision follows a recent settlement agreement involving the Public Service Company of Oklahoma (PSO) and other significant parties.
The agreement, filed with the Oklahoma Corporation Commission (OCC), would allow PSO to implement a net rate increase of approximately $119.5 million. This amount represents about 52% of the $231.2 million net revenue increase PSO sought in its revised request.
The terms of the settlement include a return on equity (ROE) of 9.50% and a 51.12% equity layer, which is a slight change from the previously authorized 9.30% ROE and 52.00% equity layer.
The analyst at BMO Capital Markets expressed continued confidence in American Electric Power, maintaining the Outperform rating. The endorsement is supported by the strategic moves made by PSO and the favorable outcome of the settlement.
The analyst's statement underlines the belief in the company's potential, noting that the sum-of-the-parts/market-to-market (SOTP/MTM) target price now moves to $114.
The price target adjustment reflects a positive outlook for American Electric Power and indicates expectations for the company's future performance. American Electric Power, with its broad portfolio and significant presence in the utility sector, is poised to benefit from the recent developments as approved by the OCC.
In other recent news, American Electric Power (AEP) has finalized the sale of OnSite Partners to Basalt Infrastructure Partners LLC, resulting in a $318 million cash inflow. The company also reported a rise in second-quarter operating earnings to $1.25 per share, a $0.12 increase from the previous year. Furthermore, AEP is exploring the sale of a minority stake in its transmission companies located in Ohio, Indiana, and Michigan.
In analyst ratings, BMO Capital Markets increased AEP's price target to $109, maintaining an Outperform rating, while BofA Securities downgraded AEP's stock from Neutral to Underperform, with a new price target at $97. Scotiabank and Mizuho Securities both raised their price targets for AEP, reflecting positive rate case developments in Indiana, Michigan, and Texas, and plans for a base rate case filing in West Virginia.
AEP also announced significant changes to its leadership structure, promoting Shane Lies to Executive Vice President and appointing Peggy Simmons as Executive Vice President of Regulatory and Chief Administrative Officer. These changes aim to improve customer service and execution efficiency.
Lastly, AEP has secured substantial customer commitments, anticipating over 15 gigawatts of incremental load by the decade's end, largely driven by data center demand.
InvestingPro Insights
American Electric Power's recent positive developments are further supported by data from InvestingPro. The company's market capitalization stands at $54.18 billion, reflecting its significant presence in the utility sector. AEP's P/E ratio of 20.29 suggests a reasonable valuation considering its growth prospects.
InvestingPro Tips highlight AEP's strong dividend history, having raised its dividend for 14 consecutive years and maintained payments for 54 years. This aligns well with the company's recent rate increase approval, potentially supporting future dividend growth. The stock's trading near its 52-week high and strong 3-month return of 17.33% reflect investor confidence in AEP's strategic moves.
Additionally, AEP's revenue growth of 4.73% in the most recent quarter and EBITDA growth of 7.98% over the last twelve months indicate solid operational performance. These metrics, combined with the analyst's positive outlook and raised price target, paint a promising picture for AEP's future.
For investors seeking a deeper understanding of AEP's financial health and growth potential, InvestingPro offers 10 additional tips, providing a comprehensive analysis to inform investment decisions.
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