Ameren (AEE) Up 0.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Ameren (AEE). Shares have added about 0.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ameren due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ameren Q3 Earnings Beat Estimates, Revenues Down Y/Y

Ameren Corporation’s third-quarter 2019 earnings of $1.47 per share from continuing operations surpassed the Zacks Consensus Estimate of $1.46 by 0.7%. However, the bottom line declined 2% from the year-ago quarter’s $1.50 per share.

Total Revenues

Total revenues came in at $1,659 million in the reported quarter, which declined 3.9% year over year due to lower electric and natural gas sales volume. The reported figure also missed the Zacks Consensus Estimate of $1,752 million by 5.3%.

Highlights of the Release

Ameren’s total electricity sales volume declined 5.6% to 20,355 million kilowatt hours (kWh) compared with 21,568 million kWh in the year-ago quarter. However, gas volumes stood at 28 million dekatherms during the third quarter.

Total operating expenses summed $1,139 million, down 4.4% year over year from $1,191 million. Interest expenses were $96 million compared with $101 million a year ago.

The company’s operating income declined 2.4% to $520 million from $533 million in the year-ago quarter.

Segment Results

The Ameren Missouri segment reported operating income of $300 million in the third quarter compared with $298 million in the year-ago quarter. The year-over-year rise reflected 2019 energy efficiency performance incentives of $13 million.

The Ameren Illinois Electric Distribution segment reported operating income of $32 million in the third quarter compared with $38 million in the year-ago quarter. The year-over-year decline reflected a lower allowed return on equity due to a lower projected average 30-year U.S. Treasury bond yield in 2019 compared to 2018.

The Ameren Illinois Natural Gas segment reported an operating loss of $1 million against the operating income of $1 million in the year-ago quarter. The year-over-year decline was because of a change in rate design.

The Ameren Transmission segment reported operating income of $53 million in the third quarter compared with $48 million in the year-ago quarter. The improvement reflected increased earnings on infrastructure investments.

Financial Condition

The company reported cash and cash equivalents of $20 million as of Sep 30, 2019, compared with $16 million at the 2018-end.

As of Sep 30, 2019, long-term debt totaled $8,651 million compared with $7,859 million as of Dec 31, 2018.

In the first nine months of 2019, cash from operating activities amounted to $1,668 million compared with $1,686 in the first nine months of 2018.

Guidance

Ameren has narrowed its 2019 guidance. The company expects earnings of $3.23-$3.33 per share compared to the earlier guidance of $3.15-$3.35. Currently, the Zacks Consensus Estimate for the company’s 2019 earnings is pegged at $3.25, which lies below the mid-point of the company’s guided range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Ameren has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Ameren has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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