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Why Is Ameren (AEE) Down 5.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ameren (AEE - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ameren 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 drivers.

Ameren Q3 Earnings Top Estimates, Revenues Drop Y/Y

Ameren Corporation’s third-quarter 2020 earnings of $1.47 per share from continuing operations beat the Zacks Consensus Estimate of $1.44 by 2.1%. The bottom line came in line with the year-ago quarter reported figure.

Notably, increased infrastructure investments made across all business segments, new Ameren Missouri electric service rates effective Apr 1, 2020 as well as lower Ameren Missouri operations and maintenance expenses benefitted quarterly earnings. However, these favorable factors were offset by lower Ameren Missouri electric retail sales on account of milder-than-normal temperatures and COVID-19 impact.

Total Revenues

Total revenues came in at $1,628 million in the reported quarter, which declined 1.9% year over year on account of lower electric sales volumes. The top line also lagged the Zacks Consensus Estimate of $1,717 million by 5.2%.

Ameren’s total electricity sales volume dropped 1.7% to 20,015 million kilowatt hours (kWh) compared with 20,355 million kWh in the year-ago quarter. However, gas volumes went up 7% to 30 million dekatherms.

Total operating expenses were $1,134 million, down 0.4% year over year.

Interest expenses were $110 million compared with $96 million a year ago.
The company’s operating income declined 5% to $494 million from $520 million in the year-ago quarter.

Segment Results

Ameren Missouri segment reported operating earnings of $297 million for the third quarter compared with $300 million in the year-ago quarter. The downside can be attributed to lower electric sales from milder-than-normal temperature in the third quarter of 2020 as well as due to the impact of COVID-19. In addition, third-quarter earnings were negatively impacted by lower energy efficiency performance incentives compared to the year-ago period.

Ameren Illinois Electric Distribution segment reported operating income of $34 million compared with $32 million in the year-ago quarter. Increased earnings on infrastructure and energy efficiency investments benefited this segment’s bottom line, which was partially offset by a lower allowed return on equity.

Ameren Illinois Natural Gas segment reported operating income of $2 million against loss of $1 million in the year-ago quarter. The upside was driven by increased earnings on infrastructure investments.

Ameren Transmission segment reported operating income of $62 million in the third quarter compared with $53 million in the year-ago quarter, led by increased earnings on infrastructure investments.

Financial Condition

The company reported cash and cash equivalents of $6 million as of Sep 30, 2020, compared with $16 million at 2019-end.

As of Sep 30, 2020, long-term debt totaled $10,172 million compared with $8,915 million as of Dec 31, 2019.

At the end of third-quarter 2020, cash from operating activities amounted to $1,329 million compared with $1,668 million at the third quarter of 2019 end.

Guidance

Ameren narrowed its 2020 earning guidance. The company now expects earnings in the range of $3.40-$3.55 per share, compared with the prior projection of $3.40-$3.60. Currently, the Zacks Consensus Estimate for the company’s 2020 earnings is pegged at $3.46 per share, slightly lower than the midpoint of its guided range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Ameren has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Ameren has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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