Renewable Push & Key Investments to Drive Growth for American Electric

American Electric Power Company, Inc. AEP is steadily investing in infrastructure upgrades to enhance operational reliability and effectively meet increasing customer demand. The company is also investing in expanding its renewable generation portfolio.

However, this Zacks Rank #3 (Hold) company is exposed to risks like a weak solvency position.

AEP’s Positive Catalysts

American Electric intends to allocate $54 billion toward electricity generation, transmission and distribution, including renewable projects, over the 2025-2029 period. The company expects these strategic investments to support a long-term earnings growth rate of 6-8%.

AEP’s broad geographic footprint enables it to draw revenues from multiple states, offering an advantage over utilities limited to a single region. The company operates the nation’s largest electricity transmission system, spanning about 40,000 circuit miles, including nearly 2,100 circuit miles of 765 kV lines that form a key part of the eastern U.S. electric interconnection grid. American Electric plans to invest roughly $34 billion in its transmission and distribution operations from 2025 to 2029 to build a more resilient grid and provide tailored energy solutions to its customers.

In the second quarter of 2025, AEP invested $1.4 billion to acquire three power plants, including the Pixley Solar Energy Facility and Flat Ridge IV Wind Energy Facility. As of June 2025, the company had secured approvals from several state regulatory commissions to purchase around 1,979 megawatts (MW) of renewable generation assets through $4.7 billion in investments. AEP also plans to allocate $9.9 billion toward regulated renewable growth between 2025 and 2029. These initiatives are expected to significantly expand American Electric’s renewable generation portfolio.

Challenges Facing AEP Stock

As of June 30, 2025, American Electric Power reported a generating capacity of 24,400 MW, of which 10,700 MW came from coal-fired plants. The company is currently assessing the impact of four newly issued Environmental Protection Agency rules on its fleet. These regulations could materially affect operating results, as AEP updates cost projections to ensure compliance while continuing to deliver reliable and affordable electricity.

As of June 30, 2025, American Electric had $41.31 billion in long-term debt, while its cash equivalents totaled $0.23 billion. Its current debt was $4.71 billion on the same date. With both current and long-term debt levels exceeding its cash reserves, AEP appears to be in a relatively weak solvency position.

AEP Stock Price Movement

In the past year, AEP shares have risen 13.1% compared with the industry’s growth of 8.3%.

Stocks to Consider

Some better-ranked stocks from the same industry are Dominion Energy, Inc. D, Exelon Corporation EXC and IDACORP Inc. IDA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

D’s long-term (three to five years) earnings growth rate is 13.6%. The Zacks Consensus Estimate for its 2025 earnings per share (EPS) stands at $3.39, which calls for a year-over-year jump of 22.4%.

EXC’s long-term earnings growth rate is 6.3%. The Zacks Consensus Estimate for its 2025 EPS stands at $2.69, which indicates a year-over-year rally of 7.6%.

IDA’s long-term earnings growth rate is 8%. The Zacks Consensus Estimate for its 2025 EPS is pegged at $5.84, which implies a year-over-year rise of 6.2%.

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This article originally published on Zacks Investment Research (zacks.com).

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