American Electric downgraded at BofA after Kentucky Power sale rejected

BofA analyst Julien Dumoulin-Smith downgraded American Electric (AEP) to Neutral from Buy with a price target of $98, down from $101, after the Federal Energy Regulatory Commission, or FERC, rejected the company’s proposed sale of its Kentucky Transmission Company and Kentucky Power utility to Algonquin Power (AQN). While stating that the earnings impact is "relatively limited," Dumoulin-Smith argues that new management failing to execute on a key strategic initiative is "more relevant for shares." He expects that the discount currently embedded in American Electric shares "will persist" given that EPS growth is near the bottom of its target range, there is elevated regulatory activity ahead in key states and there is uncertainty around the renewables sale proceeds expected in 2023.