On March 18, 2014, we issued an updated research report on
). Ameren's stable and regulated electric power operations in the
Midwest generate a relatively stable and growing earnings stream.
However, the growth continues to be restrained by the present
unfavorable macro backdrop, its predominantly coal-based
generation assets and pending regulatory cases.
Ameren Corp., a Zacks Rank #3 (Hold) stock, posted fourth quarter
2013 earnings from continuing operations of 19 cents per share,
beating the Zacks Consensus Estimate of 12 cents by 58.3%. Total
operating revenue in the reported quarter was up 5.1% year over
year to $1.32 billion. Reported revenue also surpassed the Zacks
Consensus Estimate of $1.15 billion by 14.8%.
Ameren expects positive returns from its infrastructure
investments in Federal Energy Regulatory Commission regulated
transmission. Illinois energy delivery services will help its
earnings to grow at a 7% to 10% compound annual rate through 2018
using 2013 results as the base. Ameren expects 2014 earnings in a
range of $2.25 to $2.45 per share.
However, Ameren's electric and natural gas utility infrastructure
projects involve substantial risks. These risks are related to
escalating cost, unsatisfactory outcome from the project once
completed and cost disallowances by the regulators.
Ameren's management rewarded shareholders by returning a
substantial portion of its free cash flow through dividends over
the years. The company's current dividend yield is higher than
the industry as well as the S&P 500 peer group average of
3.5% and 2.1%, respectively. Again, the current annual dividend
rate represents a 68.1% payout at the mid-point of 2014 EPS
guidance, which is toward the upper end of AEE's target of
However, profitability of Ameren's regulated utilities depends
upon rate relief at regular intervals in the company's different
service areas. Unfavorable regulatory decisions could lower its
margins and restrict its ability to pay common stock dividends.
Key Picks from the Sector
Players in the electric utility industry with a favorable Zacks
Otter Tail Corp.
Public Service Enterprise Group Inc.
). All of these stocks presently carry a Zacks Rank #1 (Strong
AMEREN CORP (AEE): Free Stock Analysis Report
EXELON CORP (EXC): Free Stock Analysis Report
OTTER TAIL CORP (OTTR): Free Stock Analysis
PUBLIC SV ENTRP (PEG): Free Stock Analysis
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