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AEP's Q4, FY'16 operating earnings top analyst estimates

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AEP's Q4, FY'16 operating earnings top analyst estimates

American Electric Power Co. Inc. beat analyst estimates for the fourth quarter of 2016 by a wide margin, thanks to higher earnings across its business segments.

The company reported operating earnings of $330.4 million, or 67 cents per share, up from $232.7 million, or 48 cents per share, in the corresponding quarter of 2015. The S&P Capital IQ consensus normalized EPS estimate for the fourth-quarter 2016 was 55 cents.

AEP's vertically integrated utilities posted fourth-quarter 2016 earnings of $150.6 million, compared with $116.8 million in the prior-year period. Meanwhile, the transmission and distribution utilities recorded earnings of $77.2 million, compared with $63.9 million in the 2015 fourth quarter.

The vertically integrated utilities segment includes AEP Generating Co., Appalachian Power Co., Indiana Michigan Power Co., Kentucky Power Co., Kingsport Power Co., Public Service Co. of Oklahoma, Southwestern Electric Power Co. and Wheeling Power Co. The transmission and distribution utilities business segment includes Ohio Power Co. and AEP Texas.

AEP Transmission Holdco, which includes the company's transmission-only subsidiaries and joint ventures, contributed $58.8 million to fourth-quarter 2016 operating earnings, up from $44.6 million in the same period of 2015. The generation and marketing segment saw a $40 million year-over-year increase in fourth-quarter operating earnings to $47.8 million in 2016.

Only the corporate and other segment recorded an earnings loss at $4 million for the most recent quarter. This compares to a loss of $400,000 in the 2015 fourth quarter.

AEP generated $3.8 billion in revenues in the fourth quarter of 2016, compared with $3.6 billion for the same period of 2015. On a GAAP basis, the company posted earnings of $373.4 million, or 76 cents per share, compared with $469.6 million, or 96 cents per share, for the fourth quarter of 2015.

The company reported full-year 2016 operating earnings of $1.94 billion, or $3.94 per share, beating the consensus normalized EPS estimate of $3.81. AEP booked $1.81 billion, or $3.69 per share, in operating earnings in 2015.

Full-year operating earnings were up $90.2 million year over year to $986.7 million for vertically integrated utilities. The company's transmission and distribution utilities saw a $113.6 million increase in 2016 operating earnings to $465.3 million, and AEP Transmission's operating earnings grew $75.1 million year over year to $266.3 million.

The generation and marketing segment's operating earnings were down $120.1 million year over year to $245.5 million. The corporate and other segment recorded a loss of $26.8 million for 2016, compared with operating earnings of $2.7 million for 2015.

AEP's full-year revenues were slightly down to $16.4 billion in 2016, from $16.5 billion in 2015. The company posted 2016 GAAP earnings of $610.9 million, or $1.24 per share, a decrease from $2.05 billion, or $4.17 per share, in 2015.

"For the first time in more than a year, we saw positive retail sales growth in the fourth quarter of 2016, and we expect modest overall load growth in 2017 as improving energy and metals prices support industrial growth and our regional economies. We benefited from warmer than normal weather in 2016, but low energy prices, a strong dollar and a weak global economy reduced overall load growth year-over-year," AEP Chairman, President and CEO Nicholas Akins said.

The company continues to target full-year 2017 operating EPS in the range of $3.55 to $3.75.