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Earnings Miss at AES Corp as Weather Takes Toll

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The AES Corporation (AES - Free Report) reported first quarter 2014 adjusted earnings per share of 24 cents, lagging the Zacks Consensus Estimate by 14.3%. Operating earnings for the reported quarter were down from the year-ago figure of 27 cents by 11.1%.

The year-over-year decline was primarily due to forced outages and a lack of gas availability during an extremely harsh January. In addition, the continuation of poor hydrology in Panama and Brazil negatively impacted first-quarter performance.

Including one-time charges of 31 cents in the reported quarter, GAAP loss was 7 cents per share as against earnings of 15 cents per share in first quarter 2013.

Highlights of the Release

AES Corporation generated total revenues of $4.26 billion in the first quarter, up 2.7% year over year. The top line also surpassed the Zacks Consensus Estimate of $4.22 billion by 1.0%.

In the reported quarter, total cost of sales was $3.46 billion, up 2.0% year over year. General and administrative expenses were $51.0 million, down 5.6% year over year.

Interest expenses in the reported quarter were $373 million, up $ 33 million year over year.

Financial Condition

AES Corp. reported cash and cash equivalents of $1.41 billion as of Mar 31, 2014 versus $1.64 billion as of Dec 31, 2013. Non-recourse debt was $13.7 billion as of Mar 31, 2014 versus $13.3 billion as of Dec 31, 2013.

Cash from operating activities in first quarter 2014 was $0.2 billion versus $0.6 billion in first quarter 2013.Capital expenditures in the quarter were $399 million versus $401 million 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 $1.00 billion to $1.3 billion in 2014.

Other Company Releases

American Electric Power Company Inc. (AEP - Free Report) reported first quarter 2014 operating earnings of $1.15 per share, beating the Zacks Consensus Estimate of 91 cents by 26.4%.

Entergy Corporation’s (ETR - Free Report) first quarter 2014 operational earnings came in at $2.29 per share in the quarter, beating the Zacks Consensus Estimate by 8.5%.

CMS Energy Corporation (CMS - Free Report) posted first-quarter 2014 earnings per share of 75 cents, beating the Zacks Consensus Estimate of 64 cents by 17.2%.

Our Take

AES Corporation missed our estimates due to extreme weather conditions impacting its normal operations. In addition, 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.

In Brazil, AES Corporation was able to secure 60 days of gas supply for its 640 MW gas fired power plant. We look upon it as a positive development. This gas storage will ensure consistent production and enable the company to cater to the increasing demand for power in Brazil during the FIFA World Cup due in a month’s time.

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

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