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In a report published Tuesday, Barclays Capital analyst Gregg Orrill downgraded the rating on
AmerenAEE from Overweight to Equal-Weight, but raised the price target from $38.00 to $41.00.
In the report, Barclays Capital noted, “We are lowering our rating to Equal Weight from Overweight following outperformance year-to-date (+6.3% versus the XLU) and the last 6 months (+12.8%). We believe AEE's premium multiple to Regulateds is justified, but we forecast little upside potential to our new $41 target ($38 previously). Our new target reflects a 6% big cap utility premium of the 2015 average P/E of 15.0x versus 14.0x previously and an increase in our EPS estimate to $2.60 from $2.57. On the 2/21 earnings call AEE gave guidance of 7-10% EPS growth and $2.25-$2.45 for 2014, which was ahead of expectations.
"It is supported by 6% ratebase growth including 28% from transmission through 2018. We like AEE's business mix and commitment to dividend growth. The EPS guidance for 2014 was $2.25-$2.45 and implied at $2.40-$2.65 for 2015. We are fine-tuning our EPS estimates to $2.33 for 2014 and $2.60 for 2015 from $2.29/$2.57, respectively.”
Ameren closed on Monday at $40.90.
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