BofA Upgrades AEP, Raises Price Target To $104

BofA Securities analyst Ross Fowler has upgraded shares of American Electric Power Company Inc. (NASDAQ: AEP) from “Underperform” to “Buy” and increased the price target from $98 to $104. This decision comes in light of the company’s recent announcement regarding a major asset sale and executive appointment.

The upgrade follows AEP’s sale of a 19.9% minority stake in its transmission holding assets for $2.8 billion, alongside the appointment of Trevor Mihalik as the new Chief Financial Officer. Fowler views this asset sale as a strategic move designed to address external equity needs, and he anticipates AEP will continue to manage its equity overhang in the near term.

In his analysis, Fowler predicts AEP will face a more manageable $2 billion in equity issuance for the second half of 2025. He notes that only the internal dividend reinvestment plan, which contributes approximately $100 million annually, will be required to achieve the company’s target of 6% to 8% earnings per share (EPS) growth.

The analyst believes AEP’s efforts to strengthen its balance sheet and the company’s potential for future EPS growth make it an attractive investment opportunity.

In a separate announcement, AEP revealed an agreement with KKR and PSP Investments to sell a 19.9% minority stake in its I&M and Ohio transmission businesses for $2.82 billion. Fowler expects the proceeds from this transaction will primarily be used to reduce AEP’s debt in the short term, leading him to lower the company’s external equity issuance forecast to $2 billion.

This adjustment means that AEP will only require $100 million in internal dividend reinvestment to meet its equity needs through 2029. Following this transaction, the analyst has revised AEP’s EPS outlook to $5.83 for 2025, $6.26 for 2026, $6.80 for 2027, and $7.33 for 2028. This projection aligns with AEP’s guidance for an average EPS accretion of $0.11 – $0.12, with the most significant accretion expected to occur between 2027 and 2029.

Fowler’s valuation of AEP is based on a sum-of-the-parts approach, which results in a slight discount compared to the industry average price-to-earnings (P/E) multiple for 2026. The 2026 EPS estimate of $6.26 forms the basis of this evaluation.