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Why Is AES (AES) Up 18% Since Last Earnings Report?

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A month has gone by since the last earnings report for AES (AES - Free Report) . Shares have added about 18% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AES due for a pullback? 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 Q1 Earnings Miss Estimates, Revenues Down Y/Y

AES Corporation’s first-quarter 2020 adjusted earnings of 29 cents per share missed the Zacks Consensus Estimate of 32 cents by 9.4%. However, earnings increased 3.6% from the year-ago quarter’s 28 cents.
 
Barring a one-time adjustment, the company delivered GAAP earnings of 22 cents per share in the reported quarter compared with 23 cents in the prior-year period.

Highlights of the Release
 
AES Corp. generated total revenues of $2.34 billion in the first quarter, down 11.8% year over year. The top line also lagged the Zacks Consensus Estimate of $2.66 billion by 12%.
 
Total cost of sales was $1,831 million in the first quarter, down 11.3% year over year. General and administrative expenses were $38 million, 17.4% lower than the year-ago quarter’s $46 million.
 
Operating income stood at $507 million, down from $586 million in the year-ago period.
 
Interest expenses summed $233 million, down from $265 million in the year-earlier period.
 
AES Corp. signed long-term contracts for 685 MW of renewable capacity, bringing the backlog to 5.3 GW.
 
The company also completed construction of 1.4 GW of new projects, including the 1.3 GW Southland Repowering project in Southern California

Financial Condition

AES Corp. reported cash and cash equivalents of $1,544 million as of Mar 31, 2020, compared with $1,029 million as of Dec 31, 2019.

Non-recourse debt totaled $15,360 million as of Mar 31, up from $14,914 million as of Dec 31.
 
In the first quarter of 2020, cash from operating activities was $373 million compared with the year-ago quarter’s $690 million.
 
Total capital expenditures during the first quarter amounted to $504 million, which increased from $494 million incurred in the year-ago quarter.
 
Guidance
 
For 2020, AES Corp. has reduced the midpoint of its adjusted EPS guidance by 5% per share, to a range of $1.32-$1.42. The Zacks Consensus Estimate for 2020 earnings is pegged at $1.42, which is above the midpoint of the company’s guided range.
 
AES Corp. also reaffirms its 2020 Parent Free Cash Flow expectation of $725-$775 million and the average annual growth rate target of 7-9% through 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, AES has an average Growth Score of C, though it is lagging a lot 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, AES has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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