AES to Benefit From Investments and Focus on Renewable Energy
The AES Corporation’s AES strategic investments and growing partnerships will further boost its bottom line. The company is focused on expanding its renewable footprint, which is expected to further drive its performance in the coming years.
However, this Zacks Rank #3 (Hold) company has to face risks related to the trend of declining wholesale prices.
Tailwinds
AES is at the forefront of the utility industry’s shift to clean energy through sustainable growth and innovation while delivering high-quality results. AES has expanded its development pipeline from 55 gigawatts (GW) as of January 2022, to 64 GW as of Dec 31, 2022. This expansion was achieved through acquisitions and higher investment in development activities.
To rapidly expand its renewable footprint, both on the domestic front and in overseas markets, the company is investing aggressively. Through 2025, AES expects to invest a total of $4 billion in new renewables, generation, transmission, modernization and smart grid at its U.S. utilities.
Currently, the generation capacity of the systems owned and/or operated under AES Clean Energy is 4,919 MW across the United States, with another 2,862 MW under construction, including 1,707 MW of solar, 639 MW of wind and 516 MW of energy storage. AES Clean Energy has a 5.2 GW backlog of projects, the majority of which are expected to come online through 2025. Based on expected growth in renewables, energy storage and U.S. utilities, the company expects its annualized growth in the range of 7-9% through 2025 and 6-8% through 2027.
Headwinds
The wholesale prices of electricity have declined significantly in recent years due to the increased penetration of renewable generation resources, cheap natural gas and demand-side management. This trend of declining wholesale prices is most likely to continue and might have a material adverse impact on the financial performance of AES.
Stocks to Consider
Some better-ranked stocks from the same sector are Vistra Corp. VST, sporting a Zacks Rank #1 (Strong Buy), and FirstEnergy Corporation FE and Atmos Energy Corp. ATO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VST’s 2023 earnings per share (EPS) indicates an increase of 205.8% from the previous year’s reported number. The same for sales indicates a year-over-year increase of 46.2%.
FE’s long-term (three to five years) earnings growth rate is 6.45%. The Zacks Consensus Estimate for FE’s 2023 EPS indicates an increase of 5% from the previous year’s reported figure.
ATO’s long-term earnings growth rate is 7.25%. It delivered an average earnings surprise of 2.4% in the previous four quarters.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FirstEnergy Corporation (FE) : Free Stock Analysis Report
The AES Corporation (AES) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
Vistra Corp. (VST) : Free Stock Analysis Report
