Ameren Corporation AEE is a regulated utility company that generates and distributes electricity and natural gas services. Its systemic investments and steady shift to clean energy will further boost its performance.
However, this Zacks Rank #3 (Hold) company faces risks related to the high expenditures to comply with air emission regulations.
AEE’s Tailwinds
Ameren’s growth has been led by its systematic and consistent investments in projects and infrastructural upgrades in recent times. It expects to spend up to $22.8 billion during the 2024-2028 period. These investments are aimed at supporting its overall system reliability and environmental compliance, along with modernizing its electric and natural gas transmission as well as distribution grid.
Utility companies like Ameren have been gaining substantially from solid clean energy investment. AEE’s Cass County solar project, with a generation capacity of 150 megawatts, was approved in June 2024 and is expected to begin service in the fourth quarter of 2024. This project is expected to be one of the three solar projects placed in service in 2024. Looking ahead, the company targets to expand its renewable portfolio by adding 2.8 gigawatts (GW) of renewable generation and an additional 1.9 GW by 2036.
Ameren is also closing its coal-fired plants to reduce carbon dioxide emissions and promote green energy. To this end, the company aims to retire its Ameren Missouri’s coal-fired energy centers by 2042. It is also accelerating the retirement year of the Rush Island coal-fired energy center from 2025 to 2024.
Headwinds for AEE
Ameren has to bear high expenditures to comply with air emission regulations, including burning ultra-low-sulfur coal and installing new or optimizing existing pollution control equipment. It expects to incur capital expenditures in the range of $90-$120 million during the 2024-2028 period to comply with existing environmental regulations.
Additional environmental controls beyond 2028 may be required, which, if implemented, will increase the company’s overall capital expenses. This is likely to hurt margins.
AEE Stock’s Price Performance
Shares of AEE have gained 21.3% in the past three months compared with the industry’s 11.4% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the industry are TransAlta Corporation TAC, DTE Energy Company DTE and Natural Grid Transco NGG. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of Zacks Rank #1 (Strong Buy) stocks here.
TransAlta Corporation delivered an average earnings surprise of 97.99% in the last four quarters. The Zacks Consensus Estimate for 2024 earnings per share (EPS) has increased 4.2% in the past 30 days.
DTE Energy delivered an average earnings surprise of 0.77% in the last four quarters. The consensus estimate for DTE’s 2024 EPS indicates year-over-year growth of 17%.
NGG’s long-term (three to five years) earnings growth rate is 3.15%. The Zacks Consensus Estimate for fiscal 2025 EPS has increased 0.9% in the past 30 days.
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