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American Electric (AEP) Down 3.3% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for American Electric Power Company, Inc. (AEP - Free Report) . Shares have lost about 3.3% in that time frame, underperforming the market.

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 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 Tops Q4 Earnings Estimates, Keeps View

American Electric reported fourth-quarter 2017 operating earnings per share (EPS) of 85 cents, exceeding the Zacks Consensus Estimate of 81 cents by 4.9%.

The bottom line also improved 4.9% from 67 cents per share reported a year ago.

For 2017, American Electric Power’s earnings were $3.68 per share, down from $3.94 from the year-ago period.

Total Revenues

American Electric’s fourth-quarter revenues of $3.8 billion were in line with the top line figure in the year-ago quarter. The reported figure surpassed the Zacks Consensus Estimate of $3.5 billion by 8.8%.

In 2017, total revenues decreased 6.5% year over year from $16.4 billion to $15.4 billion.

Quarterly Highlights

Operating expenses in the reported quarter were $1,713.7 million compared with $1,851.7 million a year ago.

Operating income in the quarter was $420.1 million, up 27.1% from $330.4 million a year ago.

Segmental Performance

Vertically Integrated Utility Operations: Operating earnings in the quarter rose to $179.4 million from $150.6 million a year ago.

Transmission & Distribution Utilities: Operating earnings were $123.9 million in the quarter, up from $81.5 million a year ago.

AEP Transmission Holdco: This segment generated an operating income of $78.5 million, up from $58.8 million recorded in the fourth quarter of 2016.

Generation and Marketing: Operating earnings were $24.5 million, down from $47.8 million in the year-ago quarter.

Corporate & Other: Operating earnings were $13.8 million, compared to operating loss of $8.3 million.

Financial Update

As of Dec 31, 2017, American Electric had $412.6 million in cash and cash equivalents compared with $399.7 million as of Dec 31, 2016.

Long-term debt was $19.03 billion as of Dec 31, 2017, compared with $17.38 billion as of Dec 31, 2016.

Cash flow from operations was $4,284 million at the end of 2017 compared with $4,521.8 million at the end of 2016.

Guidance

American Electric has reaffirmed its 2018 operating earnings guidance in the range of $3.75-$3.95.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter

VGM Scores

At this time, AEP has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is equally suitable for momentum investors and value investors.

Outlook

While estimates have been broadly trending upward for the stock, the magnitude of these revisions has been net zero. Notably, 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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