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Why Is AEP (AEP) Down 7.4% Since Last Earnings Report?

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

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

American Electric Q2 Earnings Beat, Revenues Fall Y/Y

American Electric Power reported second-quarter 2020 adjusted earnings per share of $1.08, which beat the Zacks Consensus Estimate of $1.05 by 2.9%. The bottom line also improved 8% from $1 in the year-ago quarter.

The company reported GAAP earnings of $1.05 per share compared with the year-ago quarter’s earnings of 93 cents.

The year-over-year upside can be attributed to favorable weather conditions along with solid costs savings and efficiency programs.

Total Revenues

American Electric’s second-quarter revenues of $3.5 billion missed the Zacks Consensus Estimate of $3.8 billion by 7.9%. The reported figure also declined 2.8% from the year-ago quarter’s $3.6 billion.

Quarterly Highlights

Total adjusted expenses in the quarter were $1,778 million compared with $1,862 million a year ago.

Adjusted operating income was $738.7 million, up 26.1% from $585.6 million in the year-ago quarter.

Segmental Performance

Vertically Integrated Utility Operations: Operating earnings in the quarter increased to $270.4 million from $186.9 million in the year-ago quarter.

Transmission & Distribution Utilities: Operating earnings were $144.9 million, up from $131.3 million in the year-ago quarter.

AEP Transmission Holdco: This segment generated operating earnings of $93.9 million, down from $154.6 million in the second quarter of 2019.

Generation and Marketing: Operating earnings were $55.9 million, up from $27.4 million in the year-ago quarter.

Corporate & Other: Operating losses were $31.6 million compared with operating loss of $6.6 million in the year-ago quarter.

Financial Update

As of Jun 30, 2020, American Electric had cash and cash equivalents of $348.8 million compared with $246.8 million as of Dec 31, 2019.

Long-term debt was $26.64 billion as of Jun 30, 2020, compared with $25.13 billion as of Dec 31, 2019.

Cash flow from operations was $1,746.2 million at the end of second-quarter 2020 compared with $1,800.8 million at the end of second-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 $4.29, lies below the mid-point of the guidance.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, AEP has an average Growth Score of C, a grade with the same score on the momentum front. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.


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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