) shares fell after Gerard Klauer downgraded them to underperform from neutral. On Friday, the company posted fourth-quarter earnings per share from continuing operations of 52 cents, vs. 32 cents a year ago, on a 31% revenue rise. The utility company cut 2003 EPS guidance to $2.50 to $2.70 and lowered its dividend.
Gerard Klauer analyst Michael Worms tells S&P MarketScope the downgrade is based on the potential for an equity deal overhanging the shares, which AEP indicated might be a possibility this year. He also cites the dividend cut and potential further writedown in the first quarter.
Worms set a $23 price target for AEP stock, representing a 6% yield on an annualized basis, which he thinks is a fair valuation given that the indicated average yield is 5.5% on his estimates. He cut his $2.90 2003 EPS estimate to $2.50.