12 Best Infrastructure Stocks to Buy According to Hedge Funds

7. American Electric Power Company Inc. (NASDAQ:AEP)

Number of Hedge Fund Holders: 36

American Electric Power Company Inc. (NASDAQ:AEP) is an electric public utility holding company that generates, transmits, and distributes electricity to retail and wholesale customers across the US. It operates through four segments; Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing. It utilizes diverse energy sources, which include coal, natural gas, renewables, and nuclear.

In FQ3 2024, the company earned $1.85 per share, which led to tighter full FY24 guidance. Long-term earnings growth of 6% to 8% is projected from a 2025 base, which is backed by a $54 billion infrastructure-focused capital plan. This plan, which is a 25% increase over the prior one, has the potential for further expansion due to continued load growth. The company’s transmission system, which is already a major earnings contributor, will see significant investment.

Load growth is a key driver for American Electric Power Company Inc. (NASDAQ:AEP), with 20 gigawatts in customer commitments through 2029, which mainly comes from data centers. Strong commercial load growth is already being seen, and an 8.3% overall sales increase is projected for 2025. This would be driven by double-digit commercial growth in Ohio, Indiana, and Texas. These increases necessitate substantial infrastructure improvements. The $54 billion capital plan, which is focused on wires and generation, is expected to deliver a strong rate base CAGR.

However, as January began, BMO Capital lowered the company’s price target to $100 from $108 despite an Outperform rating. This follows its $2.82 billion deal to sell a 19.9% stake in its Ohio/Indiana & Michigan Transcos to KKR (Kohlberg Kravis Roberts & Co., a global investment firm) and PSP Investments (a Canadian crown corporation investment manager).