AEP (AEP) Up 7.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for American Electric Power (AEP). Shares have added about 7.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AEP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

American Electric Q1 Earnings Miss, Revenues Fall Y/Y

American Electric reported first-quarter 2020 adjusted earnings per share of $1.02, which missed the Zacks Consensus Estimate of $1.09 by 6.4%. The bottom declined 14.3% from $1.19 in the year-ago quarter.

The company reported GAAP earnings of $1 per share compared with the year-ago quarter’s $1.16.

The year-over-year downside can be attributed to COVID-19 pandemic related expenses.

Total Revenues

American Electric’s first-quarter revenues of $3.7 billion missed the Zacks Consensus Estimate of $4.3 billion by 14%. The reported figure declined 9.8% from the year-ago quarter’s $4.1 billion.

Quarterly Highlights

Totalexpenses in the quarter were $1,841.5 million compared with $1,844.3 million a year ago.

Operating income was $751.6 million, down 6.5% from $804.2 million in the year-ago quarter.

Segmental Performance

Vertically Integrated Utility Operations: Operating earnings in the quarter decreased to $247.2 million from $310.8 million in the year-ago quarter.

Transmission & Distribution Utilities: Operating earnings were $117 million, down from $156.6 million in the year-ago quarter.

AEP Transmission Holdco: This segment generated operating earnings of $140.6 million, up from $124.2 million in the first quarter of 2019.

Generation and Marketing: Operating earnings were $34.7 million, down from $43.1 million in the year-ago quarter.

Corporate & Other: Operating losses were $35.3 million compared with operating loss of $49.9 million in the year-ago quarter.

Financial Update

As of Mar 31, 2020, American Electric had cash and cash equivalents of $1,554.6 million compared with $246.8 million as of Dec 31, 2019.

Long-term debt was $25.78 billion as of Mar 31, 2020, compared with $25.13 billion as of Dec 31, 2019.

Cash flow from operations was $615.7million during first-quarter 2020 compared with $808.3 million in first-quarter 2019.

2020 Guidance

American Electric reaffirmed 2020 operating earnings guidance in the range of $4.25-$4.45 per share. The Zacks Consensus Estimate for 2020 earnings, pegged at $4.28, lies below the mid-point of the guidance.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

Currently, AEP has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

AEP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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