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AES Corp. Beats Squarely

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The AES Corporation (AES - Free Report) reported fourth quarter 2012 adjusted earnings per share of 32 cents, edging out the Zacks Consensus Estimate of 30 cents. Adjusted EPS for the reported quarter also increased 39.1% from the year-ago earnings of 23 cents.

On a GAAP basis, the company reported earnings of 31 cents compared with 18 cents in the year-ago quarter. The one-cent variance in adjusted and GAAP earnings came from a 4 cent and 1 cent charge related to unrealized derivative and debt retirement losses, respectively. It also includes a 2 cent gain from impairments and a 2 cent gain from foreign currency transaction.  

For 2012, adjusted earnings came in at $1.24 per share, beating the Zacks Consensus Estimate of $1.22 per share. This also came above 2011 earnings of $1.02 per share.

In 2012, on a GAAP basis, the company reported a loss of $1.21 compared with earnings of 63 cents in 2011.

The favorable earnings were driven by benefits accrued from asset sale, lower costs and positive returns from the company’s generation business.


In the reported quarter, revenue was $4,640.0 million, widely surpassing the Zacks Consensus Estimate by 6.9% and year-ago quarterly revenue of $4,183.0 million.

In 2012, revenue was $18.1 billion, exceeding the Zacks Consensus Estimate of $17.6 billion. Full-year revenue also came above the $16.9 billion generated in 2011.

The revenue upturn is attributable to higher contributions from the company’s domestic business as well as from Asia, partially offset by a declining business in Europe and Africa, higher taxes and declines in Chile, and tariff headwinds at Electropaulo in Brazil.

Operating Highlights

For 2012, total cost of sales was $14.4 billion compared with $12.9 billion in 2011. This was due to an 18.2% increase in regulated sale costs.

General and administrative expenses in 2012 declined to $301.0 million from $391.0 million in 2011.

Operating income for 2012 stood at $314.0 million, down 86% from $2,211.0 million in 2011. Cost rose at a faster pace than revenue, which led to a fall in profit in 2012.

Interest expense in 2012 was $1,572.0 million versus $1,553.0 million in 2011.

Financial Condition

AES Corporation reported cash and cash equivalents of $1,970.0 million as of Dec 31, 2012 versus $1,695.0 million as of Dec 31, 2011.

The company generated $2,901.0 million in cash from operating activities at the end of 2012 compared with $2,884.0 million of cash generated at year-end 2011.

Long-term liabilities as of Dec 31, 2012 decreased to $25.9 billion from $27.1 billion as of Dec 31, 2011.


AES Corporation expects pro forma earnings for 2013 in the range $1.24 to $1.32 per share. The company expects annual average earnings growth in the band 4% to 6%. Proportionate free cash flow is estimated in the range of $750.0 million to $1,050.0 million in 2013. Cash flow from operating activities for 2013 is projected to be between $2,500.0 million and $3,100.0 million.

Other Utility Company Releases

Avista Corp. (AVA - Free Report) announced fourth-quarter 2012 earnings of 26 cents per share, missing the Zacks Consensus Estimate of 45 cents.

Hawaiian Electric Industries Inc. (HE - Free Report) announced fourth-quarter 2012 operating earnings of 39 cents per share, beating the Zacks Consensus Estimate of 32 cents.

American Electric Power Company Inc. (AEP - Free Report) posted operating earnings of 50 cents per share, beating the Zacks Consensus Estimate of 45 cents.

Our View

AES Corporation ended the year on a strong note as both earnings and revenue outpaced our expectations. We believe the company’s several ventures like the conclusion of the 447 megawatt ("MW") of installed capacity in 2012 which includes the big-time 326 MW gas-fired Trinidad Unit 2, 121 MW of wind as well as various hydroelectric projects will offer encouraging growth prospects in the near term.

Moreover, the company’s effective share repurchase program and cost control initiatives will support its broad growth objectives.

Presently, the company carries a Zacks Rank #2 (Buy). Based in Arlington, VA, The AES Corporation, a power company, operates a portfolio of electricity generation and distribution businesses.

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