AEP's Transmission and Distribution Positioning Drives Growth

Strategist

Andrew Bischof

Revenue segments as reported by the company.

Vertically Integrated Utilities

Transmission & Distribution Utilities

AEP Transmission Holdco

Generation & Marketing

Corporate and Other

Eliminations

Revenue Segments

Revenue is the money generated from normal business operations. Gross Profit is revenue minus cost of goods sold. Operating Income is revenue minus cost of goods sold and other operating expenses.

Revenue

Gross Profit

Operating Income

Revenue & Operating Income

Net Income, also called net earnings, is calculated as revenue minus cost of goods sold, operating expenses, depreciation, interest, taxes, and other expenses.

Net Income

Gross Profit, Operating Income, and Net Income as a percentage of Revenue

Gross Margin

Operating Margin

Profit Margin

Margins

An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

Maintenance and Other Operation

Asset Impairments and Other Related Charges

Depreciation and Amortization

Taxes Other Than Income Taxes

Loss on the Expected Sale of the Kentucky Operations

Gain on Sale of Mineral Rights

Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset

Loss on the Expected Sale of the Competitive Contracted Renewable Portfolio

Operating Expenses

Year over year growth in Revenue and Operating Expenses.

Revenue Y/Y

OpEx Y/Y

Growth

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

Outstanding Shares

Market Cap

Also known as Price/Sales Ratio. Calculated using Average market cap for the quarter / Annualized quarterly revenue.

Revenue Multiple

American Electric Power operates numerous utilities, providing investors protection from any one adverse regulatory ruling. Nearly all of the company’s $40 billion capital investment plan through 2027 focuses on regulated investments, supporting annual earnings growth within management's 6%-7% target. 

Transmission investment is one of AEP's most attractive long-term growth opportunities, given federal incentives to improve the efficiency of the U.S. power grid. Moaty transmission and distribution investments account for 65% of AEP's five-year capital investment plan. We believe AEP is one of the best-positioned transmission developers in the U.S., given its large transmission footprint and history of execution. We think environmental regulations, aging infrastructure, and renewable energy growth support a long runway of growth at the unit.

Regulators are now embracing renewable energy development across the company's subsidiaries, providing significant growth opportunities beyond our five-year forecast. AEP expects nearly 50% of generation will come from wind, solar and battery storage by 2032, up from roughly 20% today.

AEP is proposing investments in wind generation across its wind-rich service territories and additional solar generation while retiring over 5 GW of coal generation capacity. Management has proposed some additional new natural gas generation in part to ensure grid reliability from the growth of intermittent renewable energy resources.

The company has made several strategic moves. AEP announced that it had entered into an agreement to sell its 1,365 megawatt commercial renewable energy portfolio for $1.5 billion to IRG Acquisition Holdings, an outcome we view as reasonable particularly given the decline in valuations for renewable portfolios.

The sale of AEP's Kentucky operations remains ongoing, with the company resubmitting a FERC application in February after previous commission denial. The company continues its strategic review of its retail business, we expect AEP to divest. We like the reallocation of capital to more attractive growth opportunities such as electric transmission and distribution infrastructure.

Business Strategy & Outlook

Service territory monopolies and efficient scale advantages are the primary sources of economic moat for regulated utilities such as American Electric Power. State and federal regulators typically grant regulated utilities exclusive rights to charge customers rates that allow the utilities to earn a fair return on and return of the capital they invest to build, operate, and maintain their distribution networks. In exchange for regulated utilities’ service territory monopolies, state and federal regulators set returns at levels that aim to minimize customer costs while offering fair returns for capital providers.

This implicit contract between regulators and capital providers should, on balance, allow regulated utilities to earn more than their costs of capital in the long run, though observable returns might vary in the short run based on demand trends, investment cycles, operating costs, and access to financing. Intuitively, utilities should have an economic moat based on efficient scale, but in some cases regulation offsets this advantage, preventing excess returns on capital. The risk of adverse regulatory decisions precludes regulated utilities from earning wide economic moat ratings. However, the threat of material value destruction is low, and normalized returns exceed costs of capital in most cases, leaving us comfortable assigning narrow moats to many regulated utilities.

Narrow

Economic Moat

American Electric Power Company

American Electric Power Co., Inc. engages in the generation, transmission, and distribution of electricity. It operates through the following segments: Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation and Marketing. The Vertically Integrated Utilities segment covers the generation, transmission, and distribution of electricity for sale to retail and wholesale customers. The Transmission and Distribution Utilities segment represents the transmission and distribution of electricity for sale to retail and wholesale customers. The AEP Transmission Holdco segment comprised of the development, construction, and operation of transmission facilities through investments in its wholly-owned transmission subsidiaries and joint ventures. The Generation and Marketing segment consists of the non-regulated generation and marketing, risk management, and retail activities. The company was founded on December 20, 1906 and is headquartered in Columbus, OH.

Earnings data Q2 2023

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

Exelon

RGC Resources

WEC Energy Group

The most oversold stocks in the utilities sector presents an opportunity to buy into undervalued companies.

Top 4 Utilities Stocks That Could Lead To Your Biggest Gains In Q2 - Exelon (NASDAQ:EXC), American Electric Power (NASDAQ:AEP)

COLUMBUS, Ohio , May 17, 2023 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) issued the 2023 Corporate Sustainability Report, an annual assessment of its performance as a public company and community partner. This report marks AEP's 17th year of environmental, social and governance (ESG) disclosure, demonstrating its commitment to reporting the company's progress toward a sustainable energy future.

AEP RELEASES 2023 CORPORATE SUSTAINABILITY REPORT

American Homes 4 Rent

Crown Castle International

Cullen/Frost Bankers

Camden Property

Capital Southwest

EastGroup Properties

Enterprise Products Partners

Essential Properties Realty Trust Inc

InvenTrust Properties Corp

Kinder Morgan

Mid-America Apartment Communities

Main Street Capital

National Storage Affiliates Trust

NexPoint Residential Trust

Vistra Energy

Whitestone REIT

The Texas economy would be the 9th largest in the world, if the Lone Star State was its own country (and it once was, by the way). Relative affordability, abundant land, ample natural resources, access to the Gulf Coast for imports/exports, and a business-friendly regulatory environment have drawn people, jobs, and corporations.

The Lone Star Dividend Growth Portfolio: Betting On The Texas Economy

Iberdrola SA

Investors looking for stocks in the Utility - Electric Power sector might want to consider either Iberdrola S.A. (IBDRY) or American Electric Power (AEP).

IBDRY vs. AEP: Which Stock Is the Better Value Option?

American Electric Power's operating EPS payout ratio is poised to marginally rise from 62.3% in 2022 to 63.7% in 2023. The electric utility's total revenue edged higher in the first quarter while its operating EPS declined during the period.

American Electric Power: A Solid Pick For Dividend Growth Investors (Rating Upgrade)

American Electric Power's (AEP) first-quarter earnings are lower than expected, but revenues surpassed estimates. AEP continues with its long-term investment plan to strengthen operations.

American Electric (AEP) Q1 Earnings Lag Estimates, Sales Beat

While the top- and bottom-line numbers for AEP (AEP) give a sense of how the business performed in the quarter ended March 2023, it could be worth looking at how some of its key metrics compare to Wall Street estimates and year-ago values.

AEP (AEP) Reports Q1 Earnings: What Key Metrics Have to Say

American Electric Power (AEP) came out with quarterly earnings of $1.11 per share, missing the Zacks Consensus Estimate of $1.14 per share. This compares to earnings of $1.22 per share a year ago.

American Electric Power (AEP) Misses Q1 Earnings Estimates

First-quarter 2023 GAAP earnings of $0.77 per share; operating earnings of $1.11 per share 2023 operating earnings (non-GAAP) guidance range reaffirmed at $5.19 to $5.39 per share with long-term growth rate of 6% to 7% and FFO/Debt target of 14% to 15% AEP launches sale process for retail and distributed resources businesses, announces strategic review of certain non-core transmission joint ventures, remains on track to close on unregulated renewable asset sale COLUMBUS, Ohio , May 4, 2023 /PRNewswire/ --  AMERICAN ELECTRIC POWER Preliminary, unaudited results First Quarter ended March 31 2023 2022 Variance Revenue ($ in billions): 4.7 4.6 0.1 Earnings ($ in millions): GAAP 397.0 714.7 (317.7) Operating (non-GAAP) 571.6 616.4 (44.8) EPS ($): GAAP 0.77 1.41 (0.64) Operating (non-GAAP) 1.11 1.22 (0.11) EPS based on 514 million shares 1Q 2023, 506 million shares 1Q 2022. American Electric Power (Nasdaq: AEP) today reported first-quarter 2023 earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of $397 million or $0.77 per share, compared with GAAP earnings of $715 million or $1.41 per share in first-quarter 2022.

AEP REPORTS FIRST-QUARTER EARNINGS, REAFFIRMS 2023 GUIDANCE

American Electric's (AEP) Q1 results are likely to reflect the impact of adverse weather patterns on its earnings.

What's in Store for American Electric (AEP) in Q1 Earnings?

COLUMBUS, Ohio , May 1, 2023 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) has scheduled a quarterly earnings conference call with financial analysts at 9 a.m. ET Thursday, May 4.

AEP SCHEDULES LIVE WEBCAST OF QUARTERLY EARNINGS CALL

Kraft Heinz

PepsiCo

Pfizer

AbbVie

Johnson & Johnson

McDonald's

The major indices have been trading in a broad range for over a year. This is frustrating for bulls and bears alike.

7 High-Yield Dividend Stocks to Buy and Hold Forever

AEP (AEP) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Analysts Estimate American Electric Power (AEP) to Report a Decline in Earnings: What to Look Out for

Con Ed

NextEra Energy

Xcel Energy

Amid the ongoing transition in the utility space, electric power utilities like NEE, AEP, XEL and ED have well-chalked-out capital investment plans to upgrade infrastructure and add clean assets to their generation portfolio to provide efficient services.

4 Stocks to Watch From the Promising Electric Power Industry

COLUMBUS, Ohio , April 26, 2023 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) was included in Forbes Best Employers for Diversity list. The list was developed based on an independent survey from a sample of approximately 45,000 U.S.-based employees.

AEP RECOGNIZED AS ONE OF AMERICA'S BEST EMPLOYERS FOR DIVERSITY

COLUMBUS, Ohio , April 25, 2023 /PRNewswire/ -- The Board of Directors of American Electric Power Co. (Nasdaq: AEP) today declared a regular quarterly cash dividend of 83 cents a share on the company's common stock. The dividend is payable June 9, 2023, to shareholders of record as of May 10, 2023, and is the company's 452nd consecutive quarterly common stock cash dividend.

AEP DECLARES QUARTERLY DIVIDEND ON COMMON STOCK

Algonquin Power & Utilities

Algonquin Power & Utilities Corp. (TSX: AQN) (NYSE: AQN) ("AQN" or the "Company") announced today that Liberty Utilities Co. ("Liberty"), an indirect subsidiary of AQN, has mutually agreed with American Electric Power (NASDAQ: AEP) ("AEP") to terminate the stock purchase agreement regarding Kentucky Power Company and AEP Kentucky Transmission Company, Inc. (the "Transaction").

Algonquin Power & Utilities Corp. and American Electric Power Mutually Agree to Terminate Kentucky Power Transaction

American Water Works

CenterPoint Energy

The Zacks Utilities sector has displayed relative strength over the last month, slightly edging out the S&P 500's 7% gain.

Building a Defensive Portfolio: 3 Utilities Stocks to Consider

AEP (AEP) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

Why AEP (AEP) is Poised to Beat Earnings Estimates Again

COLUMBUS, Ohio , April 6, 2023 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) has made organizational and executive leadership changes to support the company's strategic priorities, according to Julie Sloat, president and chief executive officer. The changes are effective today.

AEP NAMES SMYTH EXECUTIVE VICE PRESIDENT GRID SOLUTIONS & GOVERNMENT AFFAIRS, ANNOUNCES ORGANIZATIONAL CHANGES

Amgen

Bank of America

Comcast

ConocoPhillips

CVS Health

Goldman Sachs

JPMorgan Chase & Co

Medtronic

MetLife

Morgan Stanley

PNC Financial Services

Phillips 66

Sempra Energy

Truist Financial

U.S. Bancorp

Vanguard High Dividend Yield ETF

There are 19 stocks on my high-yield watchlist for April 2023. The majority of the stocks on my watchlist are undervalued based on dividend yield theory.

High Yield Stock Watchlist: April 2023

SAN DIEGO--(BUSINESS WIRE)--EDF Renewables North America today announced two agreements with Indiana Michigan Power (I&M), a subsidiary of American Electric Power (Nasdaq: AEP), by which I&M will add 554 MWdc (425 MWac) of solar energy to its clean energy mix.

EDF Renewables North America Signs Agreement with Indiana Michigan Power for Solar Energy Projects

4 new Indiana solar power plants to boost reliability, sustainability of energy grid  FORT WAYNE, Ind. , April 3, 2023 /PRNewswire/ -- Indiana Michigan Power (I&M) is taking steps to significantly expand the volume of clean energy powering our customers' homes and businesses.

I&M is Powering the Next Tomorrow to Significantly Expand Clean Energy Generation

Cardinal Health

Eaton

Home Depot

Treasuries aren't the only refuge in a slowdown. Dividend names also "can provide a margin of safety," says UBS.

Seven Dividend Stocks for Uncertain Economic Times

COLUMBUS, Ohio , March 29, 2023 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) has received the 2023 Gallup Exceptional Workplace Award, which recognizes organizations that incorporate employee engagement into core business values. This is the fourth consecutive year AEP has been honored with the award.

AEP RECOGNIZED FOR EMPLOYEE ENGAGEMENT EFFORTS, RECEIVES GALLUP'S EXCEPTIONAL WORKPLACE AWARD

News for American Electric Power Company Stock (AEP)