American Electric Power Is Attractive Going Forward, Analyst Double-Upgrades Stock

BofA Securities analyst Ross Fowler upgraded the shares of American Electric Power Company Inc AEP from Underperform to Buy and raised the price target from $98 to $104.

The analyst upgraded the stock after the company announced the sale of a 19.9% minority stake in its transmission holding assets for $2.8 billion, along with the appointment of Trevor Mihalik as CFO.

The analyst sees the asset sale as a strategic move to meet external equity needs and expect AEP to continue addressing the equity overhang in the short term.

The analyst forecasts a more manageable $2 billion in equity issuance for the second half of 2025, with only the internal dividend reinvestment plan (~$100 million annually) needed to achieve 6% – 8% EPS growth.

The company’s progress toward strengthening its balance sheet and potential for EPS growth in future years make AEP an attractive investment opportunity, said the analyst.

Last week, AEP announced an agreement with KKR and PSP Investments, under which AEP will sell a 19.9% minority stake in its I&M and Ohio transmission businesses for $2.82 billion.

The analyst expects the proceeds to be primarily used to reduce debt in the short term, and the analyst lowered the equity needs forecast to $2 billion in the form of external issuance.

This leaves just $100 million of internal dividend reinvestment plans to meet equity requirements through the 2029 forecast period, noted the analyst.

Following the transaction, the analyst has revised the EPS outlook to $5.83 for 2025, $6.26 for 2026, $6.80 for 2027, and $7.33 for 2028.

This aligns with AEP’s guidance for an average EPS accretion of $0.11 – $0.12, with the most significant accretion occurring in 2027-2029.

The analyst values AEP using a sum-of-the-parts approach, leading to a slight discount compared to the industry average 2026 P/E multiple, based on 2026 EPS estimate of $6.26.

Price Action: AEP shares are trading higher by 1.20% at $94.63 on the last check Monday.

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