The AES Corporation (AES), headquartered in Arlington, Virginia, is a diversified power generation and utility company with a market cap of $14.17 billion. The company owns and/or operates power plants to generate and sell power to customers, owns and/or operates utilities to generate or purchase, distribute, transmit, and sell electricity to end-user customers, and generates and sells electricity on the wholesale market. It generates electricity using coal, gas, hydro, wind, solar, and biomass.
Shares of this leading energy company have underperformed the broader market considerably over the past year. AES has declined 9.7% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 26.6%. But in 2024, the gap has narrowed, with AES stock rising 3.7%, while the SPX is up 9.5% on a YTD basis.
Narrowing the focus, AES’ underperformance looks slightly less pronounced when compared to the S&P 500 Utilities Sector SPDR (XLU). The exchange-traded fund has gained about 3.8% over the past year, compared to AES’ negative returns for the period. Moreover, the ETF’s 13.2% gains on a YTD basis outshine the stock’s single-digit returns over the same time frame.
AES’ first-quarter earnings beat Wall Street estimates. The company posted an adjusted earnings per share of $0.50 versus $0.32 estimated by analysts. Moreover, the company reaffirmed its 2024 guidance for adjusted EPS of between $1.87 and $1.97 and adjusted EBITDA of between $2.60 and $2.90 billion. Since the earnings release on May 2, the stock has ended most sessions in the green.
For the current fiscal year, ending in December, analysts expect AES to report an EPS growth of 8.5% to $1.91 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in three of the last four quarters while missing the forecast on one other occasion.
Among the 10 analysts covering AES stock, the consensus rating is a “Strong Buy.” That’s based on seven “Strong Buy” ratings, one “Moderate Buy,” and two “Holds.”
This configuration is slightly more bullish than three months ago, with five suggesting a “Strong Buy,” one giving a “Moderate Buy,” and three advising a “Hold.”
Recently, Mizuho initiated coverage of AES stock with a Buy rating and a price target of $21, implying a potential upside of 3.7% from current levels. Mizuho analysts see the company as a strong U.S. utility growth story with minimal lag, riders, and low regulatory risk.
The mean price target of $21.62 represents a 6.5% premium to AES’ current price levels. The Street-high price target of $25 suggests an ambitious upside potential of 23.2%.
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