Here's Why American Electric Power (AEP) is a Strong Growth Stock

Zacks Investment Research details its stock selection methodology, which combines its proprietary Zacks Rank, known for #1 (Strong Buy) stocks generating a 25.41% average annual return since 1988, with complementary Zacks Style Scores (Value, Growth, Momentum, and VGM). The firm spotlights American Electric Power (AEP), a major utility, as a strong growth stock despite its Zacks Rank #3 (Hold), attributing this to its B-rated Growth and VGM Style Scores. AEP is projected for 4.3% year-over-year earnings growth for the current fiscal year, with its fiscal 2025 earnings estimate recently revised upwards to $5.86 per share, making it a potential addition to investors' shortlists.

Analysis

American Electric Power (AEP) is presented as a compelling growth opportunity within the utility sector, despite its neutral Zacks #3 'Hold' rating. The positive outlook is primarily supported by its strong 'B' ratings for both its Growth and overall VGM Style Scores. Near-term fundamentals appear solid, with a forecast for 4.3% year-over-year earnings growth for the current fiscal year and a consistent track record of positive earnings surprises averaging 4.1%. Furthermore, sentiment for fiscal 2025 is incrementally improving, evidenced by a recent upward analyst earnings revision that nudged the consensus estimate to $5.86 per share. As one of the largest integrated utilities in the U.S., AEP's operational scale is significant, though its generation mix remains heavily weighted towards fossil fuels, with approximately 40-46% of its power derived from coal and lignite. The combination of a neutral hold rating with positive underlying growth metrics suggests a stock that may be overlooked but shows signs of fundamental strength.

Key Decisions for Investors

• Growth-oriented investors may find AEP attractive for its projected 4.3% earnings growth and positive analyst sentiment, which contrasts with its neutral 'Hold' rating, potentially indicating an undervalued growth story.
• Monitor future analyst estimate revisions for fiscal 2025 closely, as the recent singular upward revision could be an early indicator of a broader positive shift in consensus.
• Investors should consider the company's significant reliance on coal-fired generation (40-46%) as a potential long-term risk factor, particularly for portfolios with ESG mandates.
• Given the mixed signals of a 'Hold' rank but strong growth scores, it may be prudent to place AEP on a watchlist while awaiting further catalysts or a more decisive shift in its overall Zacks Rank before establishing a significant position.