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AES Corp to Report Q2 Earnings: Is a Beat in the Cards?

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The AES Corporation (AES - Free Report) is set to release second-quarter 2017 results before the opening bell on Aug 8.

Last quarter, the company posted a negative earnings surprise of 15.00%. Moreover, the company missed the Zacks Consensus Estimate in the trailing four quarters, with an average negative surprise of 6.59%.

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

Why a Likely Positive Surprise?

Our proven model shows that AES Corp is likely to beat estimates 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 AES Corp has the right mix.

Zacks ESP: Earnings ESP for the company is +4.76%. This is because the Most Accurate estimate stands at 22 cents, higher than the Zacks Consensus Estimate of 21 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 holds a Zacks Rank #2, which, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

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

Factors at Play

During the second quarter, AES Corp entered into a joint venture (JV) with ENGIE to market and sell LNG from the former’s Panamanian LNG terminal to third parties in Central America. This JV will utilize the tank’s remaining capacity by selling additional LNG using its terminal. Its success is likely to get reflected in the company’s increased revenues from selling more LNG, in the upcoming results.

During the first quarter earnings call, the company announced a handful of strategies in its pipeline. These include merging its European and Asian strategic business units as a cost saving initiative as well as repositioning its portfolio towards businesses that are less carbon-intensive and have long-term US dollar-denominated contracts. Further updates on these strategies can be witnessed once the company releases its second-quarter numbers.

Also, in addition to $300 million that AES Corp has already received from the sale of its Sul business in Brazil, management expects to get $500 million in asset sale proceeds. A part of these proceeds can be anticipated in the soon-to-be reported results.

For the second quarter, the Zacks Consensus Estimate for earnings projects growth of 23.5%, while the consensus for revenues hints at a decline of 0.6% on a year-over-year basis.

Other Stock that Warrant a Look

Here is another Utility stock worth considering on the basis of our model, which shows that it has the right combination to pull off a beat.

TELUS Corp. (TU - Free Report) has an Earnings ESP of +9.09% and a Zacks Rank #2. The company is expected to report quarterly results on Aug 11. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Peer Releases

Consolidated Edison Inc. (ED - Free Report) posted second-quarter 2017 adjusted earnings of 58 cents per share that missed the Zacks Consensus Estimate of 61 cents by 4.9%. Reported earnings also dropped 3.3% from the year-ago figure of 60 cents.

CenterPoint Energy, Inc. (CNP - Free Report) reported second-quarter 2017 adjusted earnings of 29 cents per share, beating the Zacks Consensus Estimate of 21 cents by 38.1%. Quarterly earnings improved 70.6% from the year-ago figure of 17 cents.

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