The AES Corporation (AES - Free Report) made an announcement regarding its operations in Puerto Rico and the U.S. Virgin Islands, following the impact of Hurricanes Irma and Maria.
AES Corp has aided and provided assistance to its employees and local communities in Puerto Rico that were critically impacted due to the devastating nature of the hurricanes.
Impact of the Hurricanes
Both the hurricanes caused significant disruptions to the AES Corp’s Puerto Rico and the U.S. Virgin Islands operations. Notably, three of the company’s Puerto Rico power plants sustained damages. Its Puerto Rico’s 24 megawatt (MW) solar plant and one of the two units of its 524 MW coal-fired plant were impacted massively. Despite the damages, other unit is still able to generate electricity, while the damaged one is being reviewed.
Details of the Update
AES Corp has provided an update and reaffirmed 2017 guidance for all metrics. The company expects adjusted EPS to be in the lower half of the $1.00 to $1.10 range. An adverse impact of 3 cents to 5 cents is expected on the 2017 adjusted EPS guidance, primarily stemming from the sustained damages to aforementioned power plants and other business interruptions.
How Have Utilities Been Impacted?
According to BBC News, analysts had initially estimated that the United States will bear an economic cost of $300 billion from hurricane Irma alone. Meanwhile, hurricane Maria has been placed among the top 10 most intense Atlantic hurricanes on record, consequently hitting the company’s business in Puerto Rico quite hard.
Toward this, utility operators like Duke Energy Corporation (DUK - Free Report) and NextEra Energy, Inc. (NEE - Free Report) the operations of which have been impacted due to the hurricanes have started undertaking several restoration steps to normalize operations.
We expect impact of the hurricanes to show in third-quarter earnings of most utilities in the broader sector as it has severely affected the infrastructure of the state; nevertheless, investment toward restoration of service areas and infrastructure are likely to hurt the sector a little less than as previously anticipated.
Shares of AES Corp have gained 3.6%, compared to the industry’s increase of 5.4% in the last three months.
Weakness in overseas operation is adversely impacting the prospects of the company and cost of adherence to stringent environmental regulations can hurt margins.
Zacks Rank & Key Pick
AES Corp currently carries a Zacks Rank #4 (Sell). A better-ranked stock from the same space is CenterPoint Energy, Inc. (CNP - Free Report) that sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CenterPoint Energy delivered an average surprise of 10.34% in the trailing four quarters. Its current year 2017 estimates have risen by 1.6% to $1.31 per share in the last 90 days.
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