EUR 850.00 For Business Accounts Only

Morningstar | Capital Investments and Weather Drive Ameren 2Q Results

We are reaffirming our $55 per share fair value estimate, no-moat rating, and stable moat trend after Ameren reported second-quarter operating EPS of $0.97, compared with $0.79 in the same year-ago period.

Management increased its 2018 earnings guidance range to $3.15 to $3.35, up from the prior range of $2.95-$3.15 per share. Management reaffirmed its long-term 5%-7% EPS growth through 2022, driven by 7% annual rate base growth. We plan on increasing our 2018 EPS estimate in line with management's revised guidance, but near-term weather benefits have no impact on our long-term outlook.

Ameren's regulatory outlook improved during the quarter after Senate Bill 564 was passed into law. Ameren is expected to invest up to $1 billion from 2019 to 2023. We previously included $1 billion in additional capital in our forecast and increased our fair value estimate $2 per share. We applaud management's patient and diligent efforts to get legislation passed in what has been a difficult few years to get all parties in agreement. Our no-moat rating remains, but this is a strong step toward increasing our regulatory outlook for the state. We need to see additional improvement in regulatory structures to change our moat rating.

Ameren continues to progress toward building its planned 700 MW in wind generation. Ameren Missouri filed the first certificate of need for the first 400 MW, with a decision from regulators in early January.

For the quarter, earnings were boosted by very warm weather in the early summer months compared with normal temperatures last summer. Earnings also benefited from investments at its transmission and Illinois subsidaries. Partially offsetting these positives were higher nonnuclear plant outage costs.