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KeyBanc Upgrades American Electric Power and Exelon on Growth Outlook

BullishMedium impact
AEP$125.65 1.14%EXC$42.34 0.52%

American Electric Power Company, Inc. (NASDAQ:AEP) received an analyst rating upgrade to Overweight from Sector Weight, with a new price target of $133. Exelon Corporation (NASDAQ:EXC) was also raised to Sector Weight from Underweight. Shares of American Electric Power rose 1.21% to $125.70, while Exelon advanced 0.32% to $42.26.

The upbeat view on American Electric Power follows expectations of a strong third-quarter update and potential upside to earnings per share growth. A primary catalyst is the Piketon transmission project in Ohio, which could add up to $4 billion in capital investments to the utility's investment plan. Additionally, easing election uncertainty in Texas and Ohio is expected to help the stock recover valuation ground relative to the broader utility sector.

For Exelon, the rating change reflects a more balanced risk-reward profile, though potential relative underperformance remains a concern. Investors will be watching whether Exelon can meet its long-term earnings growth target of 5% to 7% amid regulatory delays, including the withdrawal of a rate case in Pennsylvania and regulatory changes in Maryland. Meanwhile, upcoming quarterly results and updates on the Piketon project will be key indicators for American Electric Power.

Key points

  • KeyBanc upgraded American Electric Power Company, Inc. (NASDAQ:AEP) to Overweight from Sector Weight with a $133 price target.
  • American Electric Power shares rose 1.21% to $125.70 following the upgrade.
  • The Piketon transmission project in Ohio could add up to $4 billion in capital spending for American Electric Power.
  • Exelon Corporation (NASDAQ:EXC) was raised to Sector Weight from Underweight, with shares edging up 0.32% to $42.26.
  • Exelon faces potential earnings growth headwinds due to regulatory lag in Pennsylvania and Maryland.

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Questions and answers

Why was American Electric Power upgraded?

American Electric Power was upgraded due to expected third-quarter earnings growth, reduced election uncertainty in Texas and Ohio, and up to $4 billion in potential transmission spending from the Piketon project in Ohio.

What is the new price target for American Electric Power?

The new price target for American Electric Power is $133 per share, raised alongside an upgrade to an Overweight rating.

Why was Exelon upgraded to Sector Weight?

Exelon was upgraded because its stock now presents a more balanced risk-reward profile, although regulatory delays in Pennsylvania and Maryland could still challenge its 5% to 7% annual earnings growth target.