American Electric to Gain From Investments and Renewable Expansion

American Electric Power Company, Inc. AEP is consistently investing in infrastructure enhancements to improve operational reliability and meet rising customer needs effectively. The company is also investing in expanding its renewable generation portfolio.

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

Positive Drivers for AEP

American Electric plans to invest $54 billion in electricity generation, transmission and distribution operations, including renewables, between 2025 and 2029. The company anticipates that this systematic investment will aid in the long-term earnings growth of 6-8%.

The company’s geographically diversified operations allow it to benefit from revenues generated from different states compared to its single-state utility peers. AEP manages the country's largest electricity transmission system, which consists of around 40,000 circuit miles of transmission lines, including nearly 2,100 circuit miles of 765 kV lines that serve as the cornerstone of the eastern United States' electric interconnection grid.

American Electric has been paying heavily to develop its renewable generation portfolio. In 2024, the company obtained regulatory approval from several state regulatory commissions to acquire approximately 2,303 megawatts (MWs) of owned renewable generating facilities for $5.5 billion in investments. Between 2025 and 2029, the company aims to invest $9.9 billion in regulated renewable expansion. These measures should dramatically boost American Electric's renewable generation portfolio.

Factors That May Hinder AEP Stock

As of March 31, 2025, American Electric Power had 23,200 MW of generating capacity, with 10,700 MW being coal-fired. The company is evaluating the effects of four new Environmental Protection Agency regulations on its generating fleet, which may significantly impact its operating results as it refines cost estimates for complying with these regulations while meeting its obligations to provide reliable and affordable electricity.

As of March 31, 2025, American Electric had $38.81 billion in long-term debt, while its cash equivalents totaled $0.50 billion. As of the same date, its current debt was $7.53 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 12.2% compared with the industry’s growth of 6.6%.

Stocks to Consider

Some better-ranked stocks from the same industry are Fortis FTS, CenterPoint Energy CNP and NiSource Inc. NI, 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.

FTS’ long-term (three to five years) earnings growth rate is 5%. The Zacks Consensus Estimate for its 2025 earnings per share (EPS) stands at $2.47, which calls for a year-over-year jump of 3.4%.

CNP’s long-term earnings growth rate is 7.8%. The Zacks Consensus Estimate for its 2025 EPS stands at $1.75, which indicates a year-over-year rally of 8%.

NI’s long-term earnings growth rate is 7.9%. The Zacks Consensus Estimate for its 2025 EPS is pegged at $1.88, which implies a year-over-year rise of 7.4%.

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

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