Our bullish outlook for Ameren Corp. (AEE) is supported by the consistent performance across its solid base of stable utility operations in the Midwestern market, as well as its focus on cost minimization, its strong balance sheet, an above industry average dividend yield and a relatively cheap earnings-based valuation.
As of now, the stock is trading at a significant discount versus its peers and the S&P 500. However, given the stable base of regulated operations and expected margin boost from a spike in merchant power prices, the discount is unwarranted.
Given these tailwinds, we believe that Ameren’s current valuation inadequately reflects its fairly balanced risk/reward profile. As such, we see significant upside from current levels and upgrade our recommendation for Ameren to Outperform.