Analysts Expect Higher Earnings from AEP in Q1 2019



Will AEP beat estimates?

American Electric Power Company (AEP) is set to release its first-quarter earnings results on April 25. Based on analysts’ estimates, AEP will report EPS of $1.10 for the quarter. In the same period last year, it had EPS of $0.96, indicating an earnings increase of ~15% YoY (year-over-year).

AEP has beaten analysts’ consensus EPS estimates for the last three consecutive quarters. In 2018, AEP posted EPS of $3.95, an increase of 7% YoY.


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Earnings drivers

American Electric Power expects its weather-normalized electric sales to increase 1% in 2019, which could have a positive effect on its revenue. The company intends to make ~$33.0 billion in capital investments through 2023 mainly in the transmission and distribution segments.

According to estimates, AEP will report total revenue of $4.21 billion in the first quarter of 2019 compared to $4.00 billion in the first quarter of 2018. Its management has provided an operating earnings guidance range of $4.00–$4.20 for 2019 with a long-term EPS growth rate of 5%–7% per year. AEP stock has rallied more than 11% so far this year, outperforming utilities (XLU) at large.

AEP plans to reduce its coal-fired power generation to nearly half and switch to renewables in the next ten years. In 2005, AEP generated 70% of its power from coal. In 2019, it expects its coal-fired power generation to fall to 46%. AEP still relies relatively heavily on coal for power generation compared to other top utilities.


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