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Investing.com -- Jefferies upgraded American Electric Power to Buy, saying the utility’s new long-term plan is achievable because rising data-center demand and heavier spending on transmission assets should lift earnings through the end of the decade.
The brokerage said AEP’s updated forecast for 7 to 9 percent annual EPS growth through 2030 is supported by its own estimate of about 9 percent. It cited the company’s larger capital plan for 2026 to 2030 and a shift toward transmission projects that carry higher regulated returns.
Jefferies said AEP is positioned to benefit from accelerating US power-load growth, with the company pointing to about 28 gigawatts of contracted incremental load through 2030 and a much larger queue behind it. The firm said the mix of contracted demand, protective tariffs and shorter regulatory recovery periods in states such as Ohio and Texas give AEP more earnings visibility than peers.
AEP’s plan calls for 72 billion dollars of spending across the period, roughly half of it on transmission. Jefferies said the company expects its transmission rate base to exceed 50 billion dollars by 2030, helping improve earned returns and reduce lag that previously constrained results.
The brokerage said AEP’s balance-sheet profile remains a watch point but noted that funds from operations relative to debt, modeled above 14 percent, marks an improvement from earlier plans.
AEP shares have already re-rated following the company’s third-quarter guidance increase, but Jefferies said the move mainly reflects estimate changes rather than a richer valuation. It said many investors remain cautious after the stock’s strong year-to-date performance, creating room for upside if the plan proves durable.
Jefferies said its revised sum-of-the-parts valuation implies about 17 percent total return over the next year, supported by potential multiple expansion. It highlighted upcoming regulatory decisions and contract conversions as key catalysts, while noting timing of load additions, regulatory outcomes and supply-chain execution as the main risks.