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AES (AES) Down 2.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for AES (AES - Free Report) . Shares have lost about 2.4% 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 Corp Q2 Earnings Miss Estimates, Revenues Down Y/Y

AES Corporation’s second-quarter 2019 adjusted earnings of 26 cents per share missed the Zacks Consensus Estimate of 27 cents by 3.7%. However, earnings grew 4% from the year-ago quarter’s 25 cents per share.
 
Barring one-time adjustment, the company delivered GAAP earnings of 2 cents per share in the reported quarter compared with 15 cents in the prior-year period.
 
Highlights of the Release
 
AES Corp generated total revenues of $2.48 billion in the second quarter, down 2.1% year over year. The top line also lagged the Zacks Consensus Estimate of $2.50 million by 1%.
 
Total cost of sales was $1,981 million in the second quarter, up 2.3% year over year. General and administrative expenses were $49 million, 40% higher than the year-ago quarter’s $35 million.
 
Operating income stood at $502 million, down 16.3% from $600 million in the year-ago period.
 
Interest expenses summed $273 million, up 3.8% from $263 million in the year-earlier period.

Highlights of the Quarter
 
AES Corp announced the merger with Simple Energy, which is now the market-leading provider of cloud-based energy solutions in the United States, serving 74 electric and gas utilities. The combined entity will be called Uplight.

The company continued to enhance its utilities business by investing in new technologies and grid modernization. This is evident from the recently-filed $1.2-billion plan at Indianapolis Power & Light (IPL) with the Indiana Utility Regulatory Commission.

Financial Condition

AES Corp reported cash and cash equivalents of $1,169 million as of Jun 30, 2019, compared with $1,166 million as of Dec 31, 2018.

Non-recourse debt totaled $14,753 million as of Jun 30, 2019, up from $13,986 million as of Dec 31, 2018.
 
In the second quarter of 2019, cash from operating activities was $324 million compared with the year-ago quarter’s $399 million.
 
Total capital expenditures during the second quarter amounted to $566 million, which increased from $499 million incurred in the year-ago quarter.

Guidance
 
For 2019, AES Corp reaffirms its 2019 Adjusted EPS guidance midpoint of $1.34 and narrows the range from $1.28-$1.40 to $1.30-$1.38. It also reaffirms its average annual growth rate target of 7-9% through 2022.
 
AES Corp also reaffirms its 2019 Parent Free Cash Flow expectation of $700-$750 million.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months.

VGM Scores

Currently, AES has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

AES has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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