Will Wall Street experts forecast a rise or a decline in American Electric Power's stock value?
American Electric Power (AEP) has seen a positive start to the year, with its stock up over 21% year-to-date in 2025, outperforming the S&P 500. Despite mixed technical signals and a consensus "Hold" rating, there are signs of a promising medium- to long-term outlook for the utility company.
In July, AEP reported record second-quarter 2025 operating earnings of $1.43 per share, exceeding expectations and guiding to the upper half of its 2025 operating earnings range of $5.75 to $5.95 per share. The company also reaffirmed a long-term growth rate of 6% to 8%. AEP is on track with a 2025 earnings per share (EPS) guidance of about $6.57 to $6.77, well above consensus estimates.
To support growth, AEP has announced a new, ambitious five-year capital investment plan of approximately $70 billion, up from its previous $54 billion plan. This capital will be allocated to areas such as renewable energy technologies and the potential inclusion of small modular nuclear reactors (SMRs). However, this increased investment footprint has raised the company's long-term debt to around $45 billion and will likely increase its debt-to-equity ratio beyond the current 1.42 level.
Despite the increased debt, AEP's predominantly regulated business model (about 90% of revenue) is expected to provide stable cash flow to manage growth, debt reduction, and shareholder returns. The company's Q2 2025 earnings beat was driven largely by higher electricity rates obtained through rate case proceedings.
AEP serves over 5.6 million customers across 11 states in the United States. The company's market cap stands at $60.8 billion.
The market reaction to these developments has been positive, with some analysts revising their price targets upward. For instance, BMO Capital increased its price target for AEP to $121, reflecting confidence in the company's strong quarterly results and earnings outlook.
Regulatory shifts could further benefit AEP's traditional energy operations. For example, recent changes in Michigan's utility board suggest more favorable conditions for legacy energy providers amid substantial industry-wide investments exceeding $1.1 trillion by 2030.
In terms of analyst ratings, among the 19 analysts covering the stock, there are six "Strong Buy" ratings, one "Moderate Buy," 11 "Holds," and one "Strong Sell." The Street-high price target of $125 implies a potential upside of 10.5% for AEP. As of writing, the stock is trading below the mean price target of $115.13.
It's worth noting that AEP has a promising earnings surprise history, beating or meeting the consensus estimates in the last four quarters. Over the past 52 weeks, AEP stock has returned 15.6%, while the S&P 500 Index has rallied 19.8%.
The Utilities Select Sector SPDR Fund, a widely-tracked ETF that includes companies like AEP, has returned 18.5% in the past 52 weeks.
Disclosure: Sohini Mondal did not have positions in any of the securities mentioned in the article.
In conclusion, the outlook for American Electric Power (AEP) stock is cautiously optimistic, supported by strong recent earnings, solid capital plans, and favorable regulatory developments. However, investors should be aware of the mixed analyst opinions and the potential impact of increased debt on the company's financial health.
Investors might find the finance sector appealing with American Electric Power (AEP), as its stock has experienced a significant increase of over 21% year-to-date in 2025, surpassing the S&P 500. This positive trend could be attributed to AEP's ambitious five-year capital investment plan of approximately $70 billion, aimed at renewable energy technologies and small modular nuclear reactors, which has, however, raised its long-term debt to around $45 billion.
