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Is a Beat in Store for AES Corporation (AES) in Q1 Earnings?

Zacks Equity Research

The AES Corporation AES is set to release first-quarter 2017 results, before the opening bell on May 8.

Last quarter, the company posted a negative earnings surprise of 2.78%. In fact, AES Corp missed the Zacks Consensus Estimate in the trailing four quarters, with an average negative surprise of 10.74%.

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

Why a Likely Positive Surprise?

Our proven model shows that AES Corp is likely to beat earnings this season because it has the right combination of two key ingredients. 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, and the company has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is +15.79%. This is because the Most Accurate estimate stands at 22 cents, while the Zacks Consensus Estimate is pegged at 19 cents. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AES Corp’s Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

The AES Corporation Price and EPS Surprise


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

Factors at Play

With respect to portfolio optimization, AES Corp has been witnessing significant consolidation of the regulated utility sector at attractive valuations in Brazil. To capitalize on this trend, the company closed the sale of AES Sul, its most material utility business in Brazil, in the fourth quarter of 2016. The estimated net proceeds of $440 million from the sale were partly received during the fourth quarter and the balance is expected to be recognized in first quarter.

In terms of its construction projects, the company expects to witness consistent progress and considers these programs to be its most significant growth drivers.

For the first quarter, the Zacks Consensus Estimate for earnings projects growth of 48.7%, while the consensus for revenues hints at a decline of 1.8% on a year-over-year basis.

Other Stocks to Consider

Here are a couple of stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

Pattern Energy Group, Inc. PEGI is scheduled to report first-quarter results on May 9. The company has an Earnings ESP of +250% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Exelon Corporation EXC has an Earnings ESP of +3.03% and a Zacks Rank #3. The company is expected to release first-quarter results on May 5.

A Peer Release

Public Service Enterprise Group Inc. PEG or PSEG reported first-quarter 2017 adjusted operating earnings of 92 cents per share, which exceeded the Zacks Consensus Estimate of 84 cents by 9.5%. Earnings also improved 1.1% on a year-over-year basis.

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Exelon Corporation (EXC): Free Stock Analysis Report
The AES Corporation (AES): Free Stock Analysis Report
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Pattern Energy Group Inc. (PEGI): Free Stock Analysis Report
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