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Is AES Corp (AES) Likely to Disappoint This Earnings Season?

Zacks Equity Research

The AES Corporation AES is set to release third-quarter 2017 results, before the opening bell on Nov 2.

Last quarter, the company delivered a positive earnings surprise of 19.05%. However, AES Corp. missed the Zacks Consensus Estimate in the three out of the trailing four quarters, with an average negative surprise of 0.44%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

On October 9, AES Corp. announced that following the impact of Hurricanes Irma and Maria, its operations in Puerto Rico and the U.S. Virgin Islands has been significantly affected. Notably, three of the company’s Puerto Rico power plants sustained notable damage. Its Puerto Rico’s 24 megawatt (MW) solar plant and one of the two units of its 524 MW coal-fired plant were severely harmed. Despite the damages, the other unit is still able to generate electricity while the damaged one is being restored.

Consequently, the company expects adjusted earnings per share (EPS) to be in the lower half of the $1.00 to $1.10 range in 2017. An adverse impact of 3-5 cents is expected on the 2017 adjusted EPS guidance, primarily stemming from the sustained damages to the aforementioned power plants and other business interruptions. This, in turn, is expected to have a significant effect on third quarter results as well.

For the soon-to-be reported quarter, the Zacks Consensus Estimate for earnings is projected to move down 8.3% while the same for revenues is estimated to remain flat on a year-over-year basis.

The AES Corporation Price and EPS Surprise

The AES Corporation Price and EPS Surprise | The AES Corporation Quote

Earnings Whispers

Our proven model does not show that AES Corp is likely to beat estimates in the third quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to be able to beat estimates. Unfortunately, that is not the case for AES Corp.

Zacks ESP: AES Corp has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 29 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AES Corp has a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are few utility stocks that worth considering on the basis of our model, which show that they have the right combination to pull off a beat.

NiSource, Inc. NI will report quarterly results on Nov 1. The company has an Earnings ESP of +7.84% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

El Paso Electric Company EE has an Earnings ESP of +3.99% and a Zacks Rank #3. The company is scheduled to report quarterly results on Nov 1.

Avista Corporation AVA has an Earnings ESP of +2.63% and a Zacks Rank #3. The company is slated to release quarterly results on Nov 1.

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