AEP - Embedded Expectations Analysis - 2021 05 27
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 their G&M segment earnings targets, their credit profile, and the strategic review of Kentucky assetsSpecifically, management may lack confidence in their ability to sustain cash flows and meet Generation & Marketing (G&M) segment EPS targets. In addition, they may have concerns about the pace of economic recovery, the impact of severe storms on their facilities, and possible reductions to the Regional Transmission Organization ROE adder. Furthermore, management may lack confidence in their ability to execute their strategic review of the Kentucky assets, achieve Southwestern Electric Power Company's authorized ROE, and maintain their credit rating. Moreover, they may be concerned about the sustainability of residential demand and rising oil prices following the pandemic
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.