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Why Is AES (AES) Down 4.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for AES (AES). Shares have lost about 4.1% in that time frame, underperforming the S&P 500.

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

AES Surpasses Q3 Earnings Estimates, Revenues Increase Y/Y

The AES Corporation’s third-quarter 2021 adjusted earnings of 50 cents per share from continuing operations exceeded the Zacks Consensus Estimate of 45 cents by 11.1%. Moreover, earnings improved 19.1% from 42 cents reported in the year-ago quarter.

The company reported GAAP earnings of 48 cents per share against a loss of 50 cents incurred in the third quarter of 2020.

The year-over-year bottom-line improvement can be attributed to higher contributions from renewables growth and the Southland portfolio in the United States. Also, higher impairments and losses on the sale of businesses in 2020 boosted third-quarter earnings on a comparable basis.

Total Revenues

Total revenues came in at $3,036 million in the reported quarter, which improved 19.3% year over year due to higher electric as well as natural gas revenues. Revenues also beat the Zacks Consensus Estimate of $2,496 million by 21.6%.

Highlights of the Release

Total cost of sales was $2,276 million for the third quarter, up 27.2% year over year.

Operating income came in at $760 million, up 0.5% from $756 million in the year-ago period.

Interest expenses totaled $242 million, down 16.6% from $290 million in the year-earlier period.

As of Sep 30, 2021, the company completed the construction or the acquisition of 643 megawatts (MW) of renewables and energy storage. Moreover, AES Corp signed or agreed to acquire 4,000 MW of renewables and energy storage, as of Sep 30, 2021, under long-term power purchase agreements, bringing the company's backlog to 9,213 MW

Financial Condition

It had cash and cash equivalents of $1,411 million as of Sep 30, 2021 compared with $1,089 million on Dec 31, 2020.

Non-recourse debt totaled $15,124 million as of Sep 30, 2021, up from $15,005 million on Dec 31, 2020.

During the first nine months of 2021, the company generated cash from operating activities worth $1,379 million compared with the year-ago period’s $2,087 million.

Total capital expenditure for the third quarter amounted to $535 million, which increased from $413 million incurred in the year-ago period.

Guidance

For 2021, the company reaffirmed its EPS guidance in the range of $1.50-$1.58 but now expects it to be at the low end of the range. The Zacks Consensus Estimate for earnings for the current year is pegged at $1.55, just above the mid-point of the guided range.

The company reaffirmed the 7-9% average annual growth target through 2025.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.09% due to these changes.

VGM Scores

Currently, AES has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. 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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