AEP Stock Rides on Investments & Renewable Portfolio Expansion

American Electric Power Company, Inc. AEP is deploying systematic investments in infrastructural upgrades to enhance the reliability of its operations and serve its utility customers efficiently. The company is also making consistent investments to boost its renewable generation portfolio.

However, this Zacks Rank #3 (Hold) company faces risks related to a weak solvency position.

AEP’s Tailwinds
 

American Electric has a capital investment plan of $54 billion for the 2025-2029 period in its electricity generation, transmission and distribution operations, including renewables. This should boost AEP’s customer reliability. The company expects this systematic investment to support it in achieving long-term earnings growth of 6-8%.

Moreover, American Electric intends to invest roughly $25.4 billion in its transmission and distribution operations between 2025 and 2029 to build a more efficient grid and provide consumers with customized energy solutions.

In the clean energy space, as of Sept. 30, 2024, AEP has regulatory nods from several state regulatory commissions to purchase 2,505 megawatts (MW) of owned renewable generation facilities for a total estimated cost of $6 billion. It plans to invest $9.9 billion in controlled renewable expansion between 2025 and 2029. This should boost its renewable generation portfolio in the years to come.

Headwinds Faced by AEP
 

As of Sept. 30, 2024, American Electric Power owned 23,000 MW of generating capacity, with 10,700 MW being coal-fired. The company is evaluating the impacts of four new Environmental Protection Agency rules on its generating fleet, which could materially impact its operating results as it refines cost estimates for complying with these rules while meeting its obligations to provide reliable and affordable electricity.

As of Sept. 30, 2024, American Electric had $39.15 billion in long-term debt, while its cash equivalents totaled $0.53 billion. As of the same date, its current debt was $4.49 billion. As both AEP’s current and long-term debt levels remained far greater than its cash reserve, the company seems to have a weak position concerning its solvency.

AEP Stock Price Movement
 

In the past six months, shares of AEP have risen 14.2% compared with the industry’s growth of 12.1%.

Image Source: Zacks Investment Research

Stocks to Consider
 

Some better-ranked stocks from the same industry are DTE Energy Company DTE, Avangrid Inc. AGR and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DTE Energy’s long-term (three to five years) earnings growth rate is 8%. The company delivered an average earnings surprise of 8.89% in the last four quarters.

Avangrid’s long-term earnings growth rate is 6%. The company delivered an average earnings surprise of 43.82% in the last four quarters.

NiSource’s long-term earnings growth rate is 7%. The company delivered an average earnings surprise of 22.43% in the last four quarters.

Free Today: Profiting from The Future’s Brightest Energy Source

The demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.

Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. This aggressive transition could mean tremendous profits for nuclear-related stocks – and investors who get in on the action early enough.

Our urgent report, Atomic Opportunity: Nuclear Energy's Comeback, explores the key players and technologies driving this opportunity, including 3 standout stocks poised to benefit the most.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research