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AES (AES) Up 0.5% Since Last Earnings Report: Can It Continue?

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Zacks Equity Research
·3 min read
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A month has gone by since the last earnings report for AES (AES). Shares have added about 0.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AES due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AES Q3 Earnings Fall Short of Estimates, Revenues Decline Y/Y

AES Corporation’s third-quarter 2020 adjusted earnings of 42 cents per share missed the Zacks Consensus Estimate of 43 cents by 2.3%. Moreover, earnings fell 12.5% from the year-ago quarter’s 48 cents per share.

Barring a one-time adjustment, the company incurred GAAP losses of 50 cents per share in the reported quarter against GAAP earnings of 32 cents in the prior-year period.

The year-over-year deterioration can be attributed to expenses associated with dispositions and impairments.

Highlights of the Release

AES Corp. generated total revenues of $2,545 million in the third quarter, down 3% year over year. The top line also lagged the Zacks Consensus Estimate of $2,649 million by 3.9%.
 
Total cost of sales was $1,729 million in the third quarter, down 10.1% year over year. General and administrative expenses were $41 million, which came in line with the year-ago quarter figure.

Operating income totaled $756 million, up 7.8% from $701 million in the year-ago period.

Interest expenses were $290 million, up 16% from $250 million in the year-earlier period.

Financial Condition

AES Corp. reported cash and cash equivalents of $1,505 million as of Sep 30, 2020, compared with $1,029 million as of Dec 31, 2019.

Non-recourse debt totaled $15,536 million as of Sep 30, 2020, up from $14,914 million as of Dec 31, 2019.

In the third quarter of 2020, cash from operating activities was $1,267 million compared with the year-ago quarter’s $761 million.

Total capital expenditures during the third quarter amounted to $413 million, which declined from $558 million incurred in the year-ago quarter.

Guidance

For 2020, AES Corp. had reaffirmed its EPS guidance of $1.32-$1.42 but now expects to generate earnings at the top end of the range. The Zacks Consensus Estimate for 2020 earnings is pegged at $1.37, which is in line with the midpoint of the guidance range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, AES has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, AES has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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