AEP - Embedded Expectations Analysis - 2021 05 10
American Electric Power Company, Inc. (AEP:USA) currently trades at a premium relative to UAFRS-based (Uniform) assets, with a 1.2x Uniform P/B. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about O&M expenses, recovery filing approvals, and Transmission business revenuesSpecifically, management may lack confidence in their ability to sustain revenue growth in Kentucky, further reduce Operation & Maintenance (O&M) expenses, and improve their return on equity (ROE). Moreover, they may have concerns about the continued impact of higher operating expenses on their ROE, the potential of their North Central Wind project in Oklahoma, and the impact of capital project delays on Transmission revenues. Furthermore, management may lack confidence in their ability to optimize their Transmission portfolio, maintain AEP Transmission Holdco's leadership position, and continue to improve commercial sales throughout the pandemic. Additionally, they may be concerned about the impact of unfavorable weather conditions on their Vertically Integrated Utilities segment, the sustainability of job market strength in the AEP service territory, and the progress of cost recovery filing approvals, particularly in Texas
American Electric Power Company is a public utility holding company. The public utility subsidiaries of the company provide electric service, consisting of generation, transmission and distribution, on an integrated basis to their retail customers. The service areas of the company's public utility subsidiaries cover portions of the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. Transmission networks are interconnected with distribution facilities in the territories served. The company's service company subsidiary provides accounting, administrative, information systems, engineering, financial, legal, maintenance and other services.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.