American Electric Positioned for Growth via Investments and Renewables

American Electric Power Company, Inc. AEP continues to invest in infrastructure upgrades to strengthen its operational reliability and effectively meet rising customer demand. The company is also expanding its renewable energy generation portfolio.

However, this Zacks Rank #3 (Hold) company faces risks related to a weak solvency position.

Key Growth Catalysts for AEP

The company’s geographically diversified operations enable it to draw revenues from multiple states, giving it an advantage over peers that operate in a single state. AEP also operates the nation’s largest electricity transmission system, spanning roughly 40,000 circuit miles of lines, including nearly 2,100 circuit miles of 765 kV lines, which form a key backbone of the eastern United States’ electric interconnection grid.

American Electric continues to make substantial investments to expand its renewable generation portfolio. In the third quarter of 2025, the company spent $1.7 billion to acquire four power plants, including the Pixley Solar Energy Facility and Flat Ridge IV and V. As of Sept. 30, 2025, it had secured regulatory approval from multiple state commissions to acquire nearly 1,826 megawatts (MW) of owned renewable generation facilities through $4.5 billion in investments. The company also received approval for 1,059 MW of renewable power purchase agreements. AEP plans to invest $8 billion in regulated renewable expansion over 2026-2030.

American Electric is moving forward with its $72 billion investment plan for 2026-2030, targeting generation, transmission and distribution infrastructure, including renewable assets. This capital strategy supports a 10% rate base CAGR through 2030, with nearly 90% of planned investments expected to be recovered through reduced-lag mechanisms.

Risks That May Pressure AEP Stock

As of Sept. 30, 2025, American Electric Power had 24,500 MW of generating capacity, with nearly 10,700 MW being coal-fired. The company is currently assessing the potential impacts of four new Environmental Protection Agency regulations on its generation fleet, which could meaningfully affect its operating results as it updates cost estimates for compliance while continuing to ensure reliable and affordable electricity service.

As of Sept. 30, 2025, American Electric had $46.14 billion in long-term debt, while its cash equivalents totaled $1.07 billion. As of the same date, its current debt was $1.16 billion. As both AEP’s current and long-term debt levels remained far greater than its cash reserve, the company seems to have a weak position concerning its solvency.

AEP Stock Price Movement

In the past six months, AEP shares have risen 19.1% compared with the industry’s growth of 12%.

Stocks to Consider

Some better-ranked stocks from the same industry are FirstEnergy Corp. FE, Entergy Corporation ETR 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.

FE’s long-term (three to five years) earnings growth rate is 6.46%. The Zacks Consensus Estimate for its 2025 revenues stands at $14.40 billion, which calls for a year-over-year jump of 6.9%.

ETR’s long-term earnings growth rate is 10.21%. The Zacks Consensus Estimate for its 2025 earnings per share (EPS) stands at $3.90, which indicates a year-over-year rally of 6.9%.

IDA’s long-term earnings growth rate is 8.01%. 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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