Ameren Corporation (AEE) Buy or Sell Stock Guide

Last updated: Jan 24, '19

The analysis below may be helpful to you if you have any of the following questions about AEE stock:

  • Is AEE a buy or a sell?
  • Should I sell or hold AEE stock today?
  • Is AEE a good buy / a good investment?
  • What are AEE analyst opinions, recommendations, ratings?

Here are AEE stock buy reasons/signals:

1. Ameren's regulatory relationships have improved in Illinois. The IMAP provides regulatory stability through 2017.

2. Upcoming transmission projects offer higher returns than the company's state-regulated asset base and should support modest earnings growth.

3. Ameren's healthy dividend provides some downside protection for shareholders.

4. Over the long term, the company currently expects to spend up to $11.4 billion, comprising up to $4.5 billion, $6.6 billion and $0.3 billion for Ameren Missouri, Ameren Illinois and ATXI, respectively, during 2018-2022. These investments are aimed to support overall system reliability, environmental compliance, and electric and natural gas utility infrastructure improvements. Within Ameren Illinois, the company aims to invest $2.4 billion for electric distribution, $2.3 billion for transmission and $1.6 billion for natural gas.

5. Ameren continues to invest in FERC-regulated electric transmission. ATXI has three MISO-approved multi-value projects for construction of transmission lines, the Illinois Rivers, Spoon River, and Mark Twain projects. Construction activities for the Illinois Rivers project, from eastern Missouri across Illinois to western Indiana, are continuing on schedule, and the last section of this project is expected to be completed by the end of 2019.

6. In renewables, Ameren plans to offer electricity through cleaner and more diverse sources of energy generation, including solar, wind, natural gas, hydro and nuclear power. Notably, the company aims at expanding renewable sources by adding at least 700 megawatts (MW) of wind generation by 2020 in Missouri and neighboring states and adding 100 MW of solar generation over the next 10 years. These new renewable energy sources will facilitate Ameren Missouri’s compliance with the state of Missouri’s requirement of achieving 15% of native load sales from renewable energy sources by 2021, subject to customer rate increase limitations.

7. A stable financial position enables Ameren to maximize shareholder value through the payment of regular dividends and repurchase of shares. Notably, the company’s cash from operating activities at the end of first-quarter 2018 was $258 million.

8. AEE forward dividend yield is 2.89%, higher than the industry (1.68%) and sector (1.08%) forward dividend yields.

9. AEE PEG ratio (P/E adjusted for growth) is 2.50, and it’s low compared to its industry peers’ PEG ratios.

Here are AEE stock sell reasons/signals:

1. Missouri remains one of the tougher regulatory environments in the nation, and recent state legislation promising more constructive regulation recently failed.

2. Given its large investment program, Ameren must request frequent rate increases with the potential for unfavorable opinions from regulators.

3. Ameren's $10.8 billion capital investment plan through 2021 at its regulated utilities could limit cash available for dividend growth.

4. Ameren Corp.'s aging infrastructure may pose risks to system reliability and force the company to incur unplanned capital expenditures and operating costs. All of Ameren Missouri’s coal-fired energy centers were constructed prior to 1978, and the Callaway nuclear energy center began operating in 1984. The age of these energy centers increases the risks of unplanned outages, reduced generation output and higher maintenance expenses.

5. Ameren's generation and delivery facilities are subject to risks associated with breakdown or failure of equipment or processes due to fuel supply or transportation disruptions, accidents and labor disputes or work stoppages by employees. The company will face operational difficulties in case of any such event. Ameren’s businesses are also commodity price sensitive.

6. Ameren has to bear high expenditure to comply with air emission regulations including burning ultra-low-sulfur coal and installing new or optimizing existing pollution control equipment. Ameren and Ameren Missouri estimate that they will need to make capital expenditures of $325-$425 million in the aggregate from 2018 through 2022 in order to comply with existing environmental regulations. Additional environmental controls beyond 2022 may be required, which if implemented will push up the company’s overall capital expenses.

7. AEE profitability is declining. The YoY profit margin change was -2.28pp.

8. AEE forward P/E ratio is 19.87, and it’s high compared to its industry peers’ P/E ratios.

9. AEE average analyst price target ($66.43) is below its current price ($68.09).

10. AEE short interest (days to cover the shorts) ratio is 3.32. The stock garners more short interest than the average industry, sector or S&P 500 stock.

What are your thoughts on AEE?

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