Ameren Corporation (AEE) Buy or Sell Stock Guide

Last updated: Oct 12, '19

Are you looking for the analysis of Ameren Corporation (AEE) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 10 reasons to buy and 10 reasons to sell AEE stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also 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 / investment?
  • What are AEE analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy AEE stock:

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 profitability is improving. The YoY profit margin change was 4.39 percentage points. See AEE profitability chart.

9. AEE forward dividend yield is 2.41%, higher than the industry (0.91%) and sector (0.79%) forward dividend yields. See AEE forward dividend chart.

10. AEE average analyst rating is Buy. See AEE analyst rating chart.

Now that you understand the bull case, let’s look at the reasons to sell AEE stock (i.e., the bear case):

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 quarterly revenue growth was -11.60%, lower than the industry and sector average revenue growth (2.53% and 3.07%, respectively). See AEE revenue growth chart.

8. AEE PEG ratio (P/E adjusted for growth) is 5.17, and it’s high compared to its industry peers’ PEG ratios. See AEE PEG chart.

9. AEE short share of float is 5.13%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock. See AEE short share of float chart.

10. AEE short interest (days to cover the shorts) ratio is 6.19. The stock garners more short interest than the average industry, sector or S&P 500 stock. See AEE short interest ratio chart.

Now let's look at the key statistics for AEE:

Metrics AEE
Price $76.64
Average Price Target / Upside $80.89 / 5.55%
Average Analyst Rating Hold
Industry Utilities - Regulated Electric
Sector Utilities
Number of Employees 8,838
Market Cap $18.75B
Forward P/E Ratio 21.8
Price/Book Ratio 3.23
PEG 5.04
Revenue (TTM) $5.81B
YoY Quarterly Revenue Growth -11.6%
Profit Margin 13.69%

What are your thoughts on AEE?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Comments (0)expand_more