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Ameren (AEE) to Gain from Systematic & Regular Investments

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We issued an updated research report on Ameren Corporation (AEE - Free Report) . The company generates and distributes electricity and natural gas to residential, commercial, industrial as well as wholesale end markets in Missouri and Illinois.

What’s Driving the Stock?

Ameren is focused on systematic and consistent investment in growth projects and infrastructure upgrade. The company invested $2.1 billion in 2017 and plans to invest $2.2 billion throughout 2018. Over the long term, the company currently expects to spend around $11.4 billion, which comprises up to $4.5 billion, $6.6 billion and $0.3 billion for Ameren Missouri, Ameren Illinois and ATXI, respectively, during 2018-2022.

The company expects an additional investment of $1 billion to modernize the Ameren Missouri electric grid along with installation of smart meters and deployment of advance technologies.

In renewables, the company plans to offer electricity through cleaner and more diverse sources of energy generation, which includes solar, wind, natural gas, hydro and nuclear power. The company aims to expand renewable sources by adding at least 700 megawatts (MW) of wind generation by 2020 in Missouri and neighboring states. It plans to add 100 MW of solar generation over the next 10 years.

A stable financial position enables Ameren to maximize shareholder value through the payment of regular dividends and repurchase of shares. Solid cash from operating activities helped the company pay dividends worth $225 million in the first nine months of 2018. The company expects dividend payout ratio between 55% and 70% of annual earnings in the next few years.

However, the company’s aging infrastructure might pose risks to system reliability and force it to incur unplanned capital expenditures, which will escalate operating costs.

In the third quarter of 2018, the company’s earnings of $1.50 per share from continuing operations surpassed the Zacks Consensus Estimate of $1.28 by 17.2%. Other companies from the same industry that reported a beat this earnings season are NiSource Inc (NI - Free Report) , DTE Energy Co (DTE - Free Report) and FirstEnergy Corp (FE - Free Report) .

Earnings of NiSource, DTE Energy and FirstEnergy beat the Zacks Consensus Estimate by 66.7%, 22.4% and 9.59% in the third quarter, respectively.

Zacks Rank & Price Movement

Ameren presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

In the past 12 months shares of Amerenhave gained 9.6% compared with the industry’s decline of 4.9%.

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