Arlington, Virginia-based The AES Corporation (AES) operates as a diversified power generation and utility company that provides affordable, sustainable energy through their diverse portfolio of thermal and renewable generation facilities as well as distribution businesses. The company is valued at a market cap of $8 billion.
Shares of this utility company have significantly lagged behind the broader market over the past 52 weeks. AES has declined 33.6% over this time frame, while the broader S&P 500 Index ($SPX) has gained 23.3%. Moreover, over the past six months, the stock is down 35.8%, compared to SPX’s 11.7% rise.
Narrowing the focus, AES has also lagged behind the Utilities Select Sector SPDR Fund’s (XLU) 27.2% gain over the past 52 weeks and 9% return on a six-month basis.
Shares of AES plummeted 10.8% the day following its mixed Q3 earnings release on Oct. 31. A lower adjusted tax rate and higher contributions from the renewable projects placed in service in 2024 resulted in an 18.3% year-over-year growth in its adjusted EPS to $0.71 per share. The bottom line exceeded the forecasted figure by a notable 18.3%.
However, the company’s revenue declined 4.2% from the year-ago quarter to $3.3 billion and fell short of the Street’s expectations by 9.4%. This might have disappointed the investors. Lower non-regulated revenues and severe drought conditions impacting its renewables business in South America primarily contributed to its top-line miss.
For the current fiscal year, ending in December, analysts expect AES’ EPS to grow 9.7% year over year to $1.93. The company’s earnings surprise history is promising. It exceeded the Wall Street estimates in each of the last four quarters.
Among the 13 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on eight “Strong Buy,” one “Moderate Buy,” three “Hold,” and one “Moderate Sell” rating.
On Jan. 27, Barclays maintained an “Overweight” rating on AES but lowered its price target to $12, which indicates a slight 6.5% potential upside from the current levels.
The mean price target of $16.67 represents a 47.9% upside from AES’ current price levels, while the Street-high price target of $25 suggests an upside potential of 121.8%.
