Ameren Earnings: Constructive Settlement in Missouri Supports Runway of Growth Opportunities

We are reaffirming our $86 per share fair value estimate after Ameren AEE reported first-quarter operating earnings of $1.00 per share, compared with $0.97 in the same year-ago period. Management reaffirmed 2023 EPS guidance of $4.25 to $4.45, in line with our expectations.

The company’s 6% to 8% growth rate guidance through 2027 remains unchanged, and we expect the company to achieve the high end of the range, representing one of the higher growth rates among its utilities peers. We forecast Ameren’s dividend to grow in line with earnings.

Similar to Ameren’s peers that have reported earnings so far, the switch from a colder-than-normal winter in 2022 to a substantially warmer-than-normal winter this year resulted in a $0.05 per share negative year-over-year impact versus normal weather. However, increased investments across its subsidiaries and operating expense management had positive earnings impacts.

Ameren management must work on achieving constructive regulatory outcomes at its two largest subsidiaries to support the company’s $19.7 billion capital investment plan that supports our growth outlook. Rate regulation has improved in Missouri and Illinois, in large part because of management’s diligent efforts. In Missouri, Ameren reached a constructive settlement with key stakeholders to raise rates $140 million. The settlement does not disclose the allowed return on equity. The outcome was consistent with our expectations and supports continued investment in the region.

In Illinois, Ameren filed its first multiyear rate plan earlier this year based on recent legislation that supports traditional ratemaking. We expect awarded allowed ROE to be more in line with the current industry average in the mid-9% range, rather than Ameren’s 10.5% allowed ROE request. However, we expect that allowed ROE in the traditional ratemaking structure will be significantly higher than allowed ROE linked to U.S. Treasury rates in the current formula ratemaking.