American Electric Power upped at Wells Fargo on prudent capital allocation
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American Electric Power (AEP
+1.3%) climbs close to a YTD high as Wells Fargo upgrades shares to Overweight from Equal Weight with a $101 price target, raised from $93, seeing the potential for a further re-rating as management continues to improve its messaging and actions around capital allocation.
AEP shares "do not adequately reflect the company's attractive features, which include a 6%-plus EPS compound annual growth rate, a long runway of capital investment driven by decarbonization related initiatives and increasingly shareholder friendly capital allocation decisions," Wells Fargo analyst Neil Kalton writes.
Potential upcoming catalysts include regulatory outcomes on the sale of Kentucky Power, news on planned contracted renewables sales and RFP outcomes in several states for new regulated renewables, according to the analyst.
In light of AEP's robust regulated investment needs and attractive current market conditions for sellers of contracted renewables, Kalton praises AEP's plan to sell some or all of its contracted renewables business and redeploy capital to regulated transmission.