AMEREN CORP. $29 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 242.6 million; Market cap: $7.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 5.5%; TSINetwork Rating: Average; www.ameren.com) sells power and natural gas to 3.3 million clients in Illinois and Missouri.
In the three months ended September 30, 2012, Ameren’s earnings fell 15.2%, to $323 million, or $1.33 a share. A year earlier, it earned $381 million, or $1.57 a share. These figures exclude unusual items, such as a writedown of a coal-fired power plant.
Revenue fell 11.8%, to $2.0 billion from $2.3 billion. Electricity sales (which accounted for 94% of Ameren’s revenue) fell 12.5% as the weak economy hurt power demand and prices at its non-regulated plants. Gas sales (6% of revenue) were flat.
Ameren has asked Missouri power regulators to approve a rate increase worth $376 million a year. That’s well above the $210 million rise that regulators have recommended. They will make a final decision in December 2012. As well, Illinois regulators recently implemented a new rate formula that will make it harder for utilities to recover the costs of upgrading and expanding their power plants and transmission networks.
Ameren trades at 12.0 times its projected 2012 earnings of $2.41 a share. However, its 2013 earnings will probably fall 15%. Even so, the $1.60-a-share dividend seems safe and yields 5.5%.
Ameren is a hold.
