Why Is AES (AES) Up 3.2% Since Last Earnings Report?

It has been about a month since the last earnings report for AES (AES). Shares have added about 3.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AES due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AES Corp Q1 Earnings Miss Estimates, Revenues Down Y/Y

 

AES Corporation’s first-quarter 2019 adjusted earnings of 28 cents per share missed the Zacks Consensus Estimate of 30 cents by 6.7%. However, earnings were in line with the year-ago quarter’s figure.

 

Barring one-time adjustment, the company delivered GAAP earnings of 23 cents per share in the reported quarter compared with $1.03 in the prior-year period.

 

Highlights of the Release

 

AES Corp generated total revenues of $2.65 billion in the first quarter, down 3.3% year over year. The top line also lagged the Zacks Consensus Estimate of $2.72 million by 2.6%.

 

Total cost of sales was $2,064 million in the first quarter, down 0.96% year over year. General and administrative expenses were $46 million, 17.9% lower than the year-ago quarter’s $56 million.

 

Operating income stood at $586 million, down from $656 million in the year-ago period.

 

Interest expenses summed $265 million, down from $281 million in the year-earlier period.

 

The company signed long-term contracts for 494 MW of renewable capacity, increasing backlog to 6.2 GW. It also signed a 12-year agreement to sell up to 18 TBTU of LNG annually in the Caribbean, beginning 2020.

 

During the quarter, AES Corp also announced a $100-million incremental annual run rate cost-savings target, which is to be realized by 2022 from digital initiatives.

 

Financial Condition

 

AES Corp reported cash and cash equivalents of $1,426 million as of Mar 31, 2019, compared with $1,166 million as of Dec 31, 2018.

 

Non-recourse debt totaled $14,550 million as of Mar 31, 2019, up from $13,986 million as of Dec 31, 2018.

 

In the first quarter of 2019, cash from operating activities was $690 million compared with the year-ago figure of $515 million.

 

Total capital expenditures during the first quarter amounted to $504 million, which increased from $494 million incurred during the year-ago quarter.

 

Guidance

 

For 2019, AES Corp reaffirmed its view for adjusted earnings of $1.28-$1.40 per share. The Zacks Consensus Estimate for full-year earnings is pegged at $1.34, which is the mid-point of the company’s guided range.

 

AES Corp also reaffirms its 2019 Parent Free Cash Flow expectation of $700-$750 million and its average annual growth rate target of 7-9% through 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, AES has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, AES has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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