Market Overview

Ameren 'Could Be Relatively Challenged From Tax Reform,' Says Morgan Stanley

Ameren 'Could Be Relatively Challenged From Tax Reform,' Says Morgan Stanley
Related AEE
Benzinga's Top Upgrades, Downgrades For November 29, 2018
Earnings Scheduled For October 31, 2018

Ameren Corp (NYSE: AEE) missed on third-quarter earnings estimates Nov. 3.

The Analyst

Morgan Stanley's Stephen Byrd downgraded the power company from Equal-weight to Underweight and left the price target for the stock unchanged at $61.

The Thesis

Both the House and Senate tax reform proposals would have a negative impact on Ameren Corp, Byrd said in a Wednesday note. (See Byrd's track record here.) 

Ameren has substantial holding company debt and it has been using net operating losses or tax losses to improve cash flow, Byrd said. This has allowed the company to finance growth without issuing equity, according to Morgan Stanley. 

Despite the potential negative impacts, the stock has outperformed the PHLX Utility Sector (NASDAQ: UTY) by 6 percent this year and it seems that the market is now pricing in either a favorable regulatory outcome in the Missouri legislature in 2018 or incremental renewable energy projects in the state, the analyst said. Either outcome has a low probability, he said.  

Ameren Corp is trading with a 2-percent premium to its peers, Byrd said. The risk-reward is unattractive at current levels, as the stock lacks a high probability catalyst to support 2017 performance, he said. 

The Price Action

Ameren, which has gained around 20 percent year-to-date, closed down slightly Wednesday at $61.25. 

Latest Ratings for AEE

Nov 2018UBSDowngradesBuyNeutral
Nov 2018BarclaysMaintainsEqual-WeightEqual-Weight
Nov 2018BarclaysMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for AEE
View the Latest Analyst Ratings

Posted-In: Morgan Stanley Stephen Byrd Tax ReformAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (AEE + UTY)

View Comments and Join the Discussion!

Latest Ratings

CGBDJP MorganUpgrades15.5
NLYJP MorganUpgrades10.5
NTNXMorgan StanleyUpgrades58.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Buckingham Makes The Bull Case For Charter Communications

Morgan Stanley: Western Digital's NAND Forecast May Be Overly Bullish