On Feb 25, we maintained our Neutral recommendation on
American Electric Power Company Inc.
), on the heels of its strong earnings in the fourth quarter of
2012 along with stable guidance for 2013, tempered by mixed
numbers for full year 2012.
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American Electric Power clocked operating earnings of 50 cents
per share in the fourth quarter of 2012, beating the Zacks
Consensus Estimate of 45 cents. The company's results also came
above the year-ago quarterly earnings of 40 cents per share. The
beat is commendable as this comes in the face of sluggish demand
growth and the negative impact of customer switching in Ohio.
On a reported basis, the company registered earnings of 5 cents
per share in the reported quarter versus 64 cents per share in
the year-ago period. The variance of 45 cents between the
reported and operating numbers was due to Ohio Plant impairments
charge of 38 cents; restructuring program charge of 4 cents; and
UK Windfall Taxes of 3 cents.
Quarterly revenue at American Electric Power was $3.6 billion
higher than both the Zacks Consensus Estimate of $3.5 billion and
the year-ago number of $3.4 billion. Full year 2012 revenue was
$14.9 billion versus the Zacks Consensus Estimate of $15.4
billion. Revenue for the reported full year was also lower than
the full year 2011 number of $15.1 billion.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for full year 2013 rose by a penny to $3.14
per share. Meanwhile, the Zacks Consensus Estimate for full year
2014 remained unchanged at $3.31 per share. The company now has a
Zacks Rank #3 (Hold).
American Electric Power is one of the largest investor-owned
utility holding companies in the country, catering to over 5
million customers spread over 11 states. Historically, however,
the company trades at a discount to its large cap electric power
utility peers due to its high earnings exposure to industrial
customers and its major presence in Ohio.
Going forward, the company offers stable earnings through
consistent performance in core regulated operations, growth
through transmission network expansion and an above-average
dividend yield. However, tepid economies in a number of its
service states restrict opportunities for growth. Also,
uncertainty surrounding pending regulatory cases, its
predominantly fossil-fuel based generation assets and lower
wholesale sales continue to weigh on the valuation of the stock.
Other Stocks to Look For
A few stocks that are performing well in the industry where
American Electric Power operates are Zacks Ranked #1 (Strong Buy)
Brookfield Infrastructure Partners L.P.
Otter Tail Corporation
Pike Electric Corporation