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AES Corp. Meets Q2 Earnings Estimates, Keeps Guidance

Zacks Equity Research

The AES Corporation’s (AES) second quarter 2014 adjusted earnings per share of 28 cents were in line with the Zacks Consensus Estimate. Operating earnings for the reported quarter were down from the year-ago figure of 35 cents by 20%.

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The year-over-year decline was primarily due to a higher effective tax rate in the reported quarter which had a negative impact of 11 cents.  This was marginally offset by an improved performance in the United States, Andes, Brazil and Mexico, Central America and Caribbean (:MCAC) and accretion from a lower share count.

Highlights of the Release

AES Corporation generated total revenues of $4.31 billion in the second quarter, up 9.3% year over year. The top line also surpassed the Zacks Consensus Estimate of $4.14 billion by 4.1%.

In the reported quarter, total cost of sales was $3.49 billion, up 14.7% year over year. General and administrative expenses were $52.0 million, down 1.9% year over year.

Interest expenses in the reported quarter were $323 million, down 4.1% year over year.

Financial Condition

AES Corp. reported cash and cash equivalents of $1.51 billion as of Jun 30, 2014 versus $1.64 billion as of Dec 31, 2013. Non-recourse debt was $13.8 billion as of Jun 30, 2014 versus $13.3 billion as of Dec 31, 2013.

Cash from operating activities in second quarter 2014 was $0.23 billion versus $0.57 billion in second quarter 2013. Capital expenditures in the quarter were $0.5 billion versus $0.46 billion a year ago.


AES Corp. reiterated its adjusted earnings guidance for 2014 in the range of $1.30 to $1.38 per share. The company however expects 2014 earnings to be on the lower end of the guidance range primarily due to the continuation of dry hydrological conditions in Latin America.

Cash flow from operating activities for 2014 is projected between $2.2 billion and $2.8 billion. Free cash flow is estimated in the range of $1.35 billion to $1.95 billion in 2014.

Other Company Releases

American Electric Power Company Inc. (AEP) reported second quarter 2014 operating earnings of 80 cents per share, beating the Zacks Consensus Estimate of 75 cents by 6.7%.

Entergy Corporation’s (ETR) second quarter 2014 operational earnings came in at $1.11 per share in the quarter, lagging the Zacks Consensus Estimate of $1.14 by 2.6%.

CMS Energy Corporation (CMS) posted second quarter 2014 earnings per share of 30 cents, beating the Zacks Consensus Estimate of 26 cents by 15.4%.

Our Take

Despite a substantially higher tax rate, AES Corporation’s earnings were in line with our estimates as its Strategic Business Units in United States, Andes, Brazil and Mexico, Central America and Caribbean performed better year over year.

The company continues to streamline its operations by selling its non-core assets. AES Corp. is also repurchasing its shares and prepaying recourse debt.  In addition, keeping stringent regulations in mind, AES Corp is working towards making its generation portfolio environment friendly.  At present, 2,400 megawatts of environmental upgrades are under construction and on track to come online through 2018.

The higher tax rate which adversely impacted results is expected to come down in the second half of the year, but the poor hydrological conditions are expected to persist in Panama and Brazil. This is going to have a negative impact on earnings in the range of 7–10 cents per share in 2014.

AES Corp. currently holds a Zacks Rank #3 (Hold).

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