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On July 10, Zacks Investment Research upgraded Ameren Corporation (AEE - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Ameren Corporation has been witnessing rising earnings estimates on the back of strong earnings performance. The supplier of electricity and natural gas to over 3.3 million customers delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 18.69%. The long-term expected earnings growth rate for this stock is 7.5%    

To maintain its performance over the long run, Ameren Corporation has long-term investment plans aimed at strengthening its operations. The company intends to invest a total of $8.3 billion on regulated infrastructure between 2014 and 2018, with roughly $1.83 billion allocated for 2014. Ameren’s 2014 spending projection reflects a 32.6% year-over-year jump.

Ameren Corporation is progressing well on its Illinois Rivers Transmission Project and plans to invest $1.4 billion in its Ameren Illinois & Ameren Transmission Company of Illinois (ATXI) ventures. The scheduled completion of these projects will enable Ameren to provide uninterrupted services to its customers.

Ameren’s focus on rate regulated operations is expected to provide stability to its revenue stream. Moreover, the company disburses regular dividends with a long-term plan to increase the payout ratio to a band of 55% and 70%. This will keep the investors interested.

Based on strong fundamentals, the company raised its earnings per share projection for 2014 to a range of $2.30–$2.50 from $2.25–$2.45. The company expects earnings per share to increase at a 7% to 10% compound annual growth rate from 2013 through 2018.

Over the last 30 days, the Zacks Consensus Estimate for 2014 increased 12.7% to $2.37 per share as two estimates were revised higher while, for 2015, one positive estimate revision lifted the consensus by 7.8% to $2.55 per share.

Other well-ranked operators in the utility space include Consolidated Edison, Inc. (ED - Analyst Report), Wisconsin Energy Corp. (WEC - Analyst Report) and American Electric Power Co., Inc. (AEP - Analyst Report). Consolidated Edison and Wisconsin Energy carry the same Zacks Rank as Ameren, while American Electric Power holds a Zacks Rank #2 (Buy).

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