Why American Electric Power Stock Just Popped
Key Points
American Electric Power missed on Q3 sales this morning.
AEP may have beaten on earnings, however, and forecasts faster earnings growth going forward.
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American Electric Power (NASDAQ: AEP) stock gained 5.5% through 1:15 p.m. ET Wednesday despite missing on earnings this morning.
Heading into the utility company's third-quarter report, analysts forecast AEP would earn $1.81 per share on $5.6 billion in revenue. AEP apparently missed by a penny, though, reporting only $1.80 per share and sales of only $5.4 billion.
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AEP Q3 earnings
Or did AEP miss? Turns out, $1.80 was only AEP's operating earnings, while earnings as calculated according to generally accepted accounting principles (GAAP earnings) were actually $1.82, above analyst forecasts.
By that metric, AEP may actually have beaten expectations.
It wasn't a huge beat. From $1.80 a year ago to $1.82 today, AEP grew Q3 earnings less than 1% year over year. On the plus side, AEP says it will do better going forward.
Turning to guidance, management confirmed it expects full-year 2025 earnings to land "in the upper half of the range" for previous guidance: $5.75 to $5.95 per share. (Analysts are expecting $5.90 per share, by the way.) Furthermore, AEP says it may reach a "new, increased long-term operating earnings growth rate of 7-9% over the next five years," and this plan is "supported by an expected 10% annual growth in rate base."
Is AEP stock a buy?
So not great news for AEP customers perhaps -- their rates are going up. But pretty good news for shareholders.
I am not 100% convinced this makes AEP stock a buy though. Valued on consensus earnings for this year, AEP stock costs more than 20 times earnings. That seems like a lot to pay for single-digit earnings growth. Still, AEP's 3.3% dividend yield will help to make up some of the difference.
Good enough to buy? Perhaps.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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