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Here's Why You Should Add AES Corp Stock to Your Portfolio

Zacks Equity Research

The AES Corporation’s AES withdrawal of operations from risky markets as well as growing partnerships and focus on renewables should act as a growth catalyst.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) utility company a promising pick for investors.

Focus on Cost Reduction

AES Corp is focused on maintaining financial flexibility by undertaking cost-reduction initiatives —including overhead reductions, efficiency procurement and operational improvements. Since 2012, the company has achieved $300 million in cost savings and revenue enhancements. In 2019, it announced an additional annual cost-saving target worth $100 million by 2022, driven by digital initiatives.

Growth Projections

The Zacks Consensus Estimate for the company’s 2019 earnings per share is pegged at $1.34 on revenues of $10.74 billion. The bottom and top lines are expected to rise year over year, which indicate increases of 8.06% and 0.08%, respectively, from the year-ago reported figures.

The consensus mark for 2020 earnings is pegged at $1.47 per share on revenues of $11.05 billion. While the bottom-line estimate suggests a 9.70% year-over-year increase, that for the top line implies a 2.87% improvement.

The company’s long-term (three to five years) earnings growth is pegged at 8.50%.

Price Performance

In the past year, shares of AES Corp have gained 35.3% compared with the industry’s growth of 14.8%.

 


Dividend Yield & Return on Equity (ROE)

The company rewards its shareholders through dividend payments. Its current dividend yield is 2.85%, higher than the S&P 500’s average of 1.8%.

AES Corp has an ROE of 22.67%, higher than the industry’s average of 9.47% and Zacks S&P 500 composite’s 17.10%. This indicates that the company is efficient in utilizing shareholders’ funds.

Other Stocks to Consider

Some other top-ranked stocks in the sector are FirstEnergy Corporation FE, NorthWestern Corporation NWE and MDU Resources Group, Inc MDU. All the stocks currently have a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FirstEnergy, NorthWestern and MDU Resources delivered a positive earnings surprise of 2.87%, 10.49% and 2.79%, on average, respectively, in the last four quarters.

Long-term earnings growth rate for FirstEnergy, NorthWestern and MDU Resources is pegged at 6%, 2.80% and 7.10%, respectively.

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The AES Corporation (AES) : Free Stock Analysis Report
 
FirstEnergy Corporation (FE) : Free Stock Analysis Report
 
NorthWestern Corporation (NWE) : Free Stock Analysis Report
 
MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
 
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