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AES Corp (AES) to Post Q4 Earnings: What's in the Cards?

Zacks Equity Research

The AES Corporation AES is set to release fourth-quarter 2018 results on Feb 27, before the opening bell.


In the last reported quarter, the company witnessed a positive earnings surprise of 20.69%. Moreover, it surpassed the  Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 14.09%.


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


Factors at Play


AES Corp’s subsidiary, Alto Maipo experienced construction difficulties for its 531 MW hydroelectric project in May 2018,  which resulted in increased projected costs over the original $2-billion budget. It also ended up having $221 million of derivative liabilities as of Sep 30, 2018.

The wholesale prices of electricity continue to decline significantly, owing to the increased penetration of renewable generation resources, cheap natural gas and demand side management. This continuing trend of declining wholesale prices might have a material adverse impact on the financial performance of the company.


In line with the above-mentioned factors, the Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at 33 cents, reflecting an annual decline of 23.26%.


However, lower corporate tax rate arising from the U.S. tax reform and favorable impact of deferred tax re-measurement are expected to have a positive impact on AES Corp’s fourth-quarter results.


In August 2018, AES Corp’s top line significantly gained from the inauguration of AES Colon, a combined cycle power plant, with a capacity of 381-megawatt (MW), and the company’s first liquefied natural gas (LNG) terminal in Central America. Such expansion of its renewable footprint might continue to drive AES Corp’s performance in the quarter to be reported. In line with this, the Zacks Consensus Estimate for the company’s fourth-quarter sales is pegged at $2.71  billion, reflecting year-over-year rise of 2.7%.


The AES Corporation Price and EPS Surprise

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

What the Zacks Model Unveils

Our proven model does not conclusively show that AES Corp is likely to beat estimates in the fourth 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) — for this to happen and that is not the case here.

Earnings ESP: AES Corp has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


Zacks Rank: AES Corp currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.


Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.


Recent Utility Releases


American Electric Power Co., Inc. AEP reported fourth-quarter 2018 operating earnings per share (EPS) of 72 cents, in line with the Zacks Consensus Estimate.


NextEra Energy, Inc. NEE reported fourth-quarter 2018 adjusted earnings of $1.49 per share, which fell short of the Zacks Consensus Estimate of $1.51 by 1.3%.


Xcel Energy Inc. XEL posted fourth-quarter 2018 operating earnings of 42 cents per share, in line with the Zacks Consensus Estimate.


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