Why Ameren (AEE) Could Reach $39

Story updated at 9:45 a.m. to reflect market activity.

NEW YORK (TheStreet) -- UBS raised its price target for Ameren (AEE) to $39 from $36 Monday, maintaining its "neutral" rating for the company.

Ameren gained 1.3% to $41.40 in morning trading.

The bank raised its estimates through 2016 for the company in addition to raising the price target. The increases were driven by fewer regulatory headwinds and rightsizing of the parent drag. The new, higher price target is still lower than Ameren's Friday closing price of $40.88.

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Separately, TheStreet Ratings team rates AMEREN CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMEREN CORP (AEE) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 45.30% is the gross profit margin for AMEREN CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.43% is above that of the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Despite the weak revenue results, AEE has outperformed against the industry average of 32.9%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • AMEREN CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AMEREN CORP swung to a loss, reporting -$2.67 versus $2.14 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus -$2.67).
  • AEE's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.23 is very low and demonstrates very weak liquidity.

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