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Investing.com - UBS raised its price target on American Electric Power (NASDAQ:AEP) to $116.00 from $110.00 on Friday, while maintaining a Sell rating on the utility company. The stock, currently trading at $116.91, sits near its 52-week high of $119.06, according to InvestingPro data.
UBS analyst Ross Fowler noted that AEP previewed an increase of up to $70 billion in capital expenditures over the next five years, compared to $54 billion in its previous five-year guidance. Despite this significant increase, UBS expects this will support the existing 6% to 8% EPS growth rate range rather than drive an increase. The company maintains a strong track record with 55 consecutive years of dividend payments and a current yield of 3.18%, as highlighted in InvestingPro’s analysis.
The firm pointed out that AEP will provide 2026 EPS guidance and updates on long-term EPS growth rate, financing, and capital expenditures through 2030 with its third-quarter report, scheduled for October 29. The increased capital spending could potentially allow the company to guide to the upper half of the EPS compound annual growth rate over the latter part of the forecast period. With a P/E ratio of 17.1x and strong financial health score rated as "GOOD" by InvestingPro, the company shows mixed valuation signals.
UBS highlighted that the West Virginia securitization impact is putting some pressure on near-term EPS growth. The firm believes AEP stock, currently trading at a 2% discount to peers, fully reflects the company’s growth prospects.
The investment bank maintained its Sell rating, citing regulatory execution risks, the company’s track record, and uncertainty around sales growth trends fully materializing.
In other recent news, American Electric Power (AEP) has announced a $2 billion subordinated debenture offering, with the sale consisting of $1.1 billion of 5.800% Fixed-to-Fixed Reset Rate Junior Subordinated Debentures, Series C, and $900 million of 6.050% Fixed-to-Fixed Reset Rate Junior Subordinated Debentures, Series D, both due in 2056. Additionally, AEP Texas disclosed a $900 million senior notes offering, which includes $150 million of 5.70% Senior Notes, Series O, due 2034, and $750 million of 5.85% Senior Notes, Series P, due 2055. Evercore ISI initiated coverage on AEP with an Outperform rating, setting a price target of $133.00, highlighting the company’s potential benefits from developments in the ERCOT and PJM markets. Meanwhile, Mizuho has lowered its price target for AEP to $113.00 from $116.00, maintaining a Neutral rating due to regulatory concerns. In contrast, Ladenburg Thalmann raised its price target for AEP to $112.00 from $109.00, citing increased capital spending plans discussed in the company’s second-quarter earnings call. These updates reflect varied analyst perspectives and strategic financial moves by AEP.
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