Yahoo Finance AES Rides on Renewable Expansion, Declining Wholesale Prices Ail
The AES Corporation AES focuses on increasing its renewable energy generation by adding solar, wind and battery energy storage on a regular basis to meet its long-term clean energy goals. The company is also involved in reducing its carbon footprint through the retirement of its coal-fired units.
However, this Zacks Rank #3 (Hold) company faces risks like a decline in wholesale prices and an unfavorable financial position, which act as a headwind.
Tailwinds
Like other utility providers, AES Corp. has been expanding its renewable generation portfolio to gain the benefits of the growing clean energy market. It completed the construction or acquisition of 593 megawatts (MW) of renewables and energy storage in the first quarter of 2024. It signed long-term contracts for 1.2 GW, thereby increasing its backlog to 12.7 GW as of Mar 31, 2024.
To promote clean energy adoption, AES Corp. has also been rapidly retiring its coal-fired units, thereby reducing carbon emissions from its portfolio. In 2023, the company exited or announced the sale or closure of 2.1 GW of coal generation in Vietnam, the United States and Chile.
AES Corp. is also focusing on its growth in the liquified natural gas (LNG) market by operating the only LNG import terminal in the Dominican Republic, Andres, with 160,000 cubic meters of storage capacity. The company has long-term contracts to sell re-gasified LNG to industrial users and third-party power plants, capturing demand from industrial and commercial customers.
Headwinds
Wholesale electricity costs have fallen dramatically in recent years as a result of the growing use of renewable energy supplies, low-cost natural gas and demand-side management. Furthermore, in many areas, new power purchase agreements for renewable power have been given at much lower costs than those awarded a few years prior. This downward trend in wholesale pricing is expected to persist, which might have a significant negative influence on AES' financial performance.
AES Corp. had a long-term debt of $25.37 billion as of Mar 31, 2024, which grew sequentially. Its current debt, worth $4.23 billion as of Mar 31, 2024, also increased sequentially. The company’s cash equivalents, worth $2.75 billion as of Mar 31, 2024, remained much lower than its long-term and current debt levels. This implies that AES Corp. has a weak solvency position.
Stocks to Consider
Some better-ranked stocks from the same industry are CenterPoint Energy CNP, IDACORP, Inc. IDA and Consolidated Edison ED, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CenterPoint Energy’s long-term (three to five years) earnings growth rate is 7%. The Zacks Consensus Estimate for the company’s 2024 sales indicates an improvement of 1% from the prior-year reported figure.
IDACORP delivered an average earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for IDA’s 2024 sales suggests an improvement of 1.1% from the prior-year reported figure.
Consolidated Edison’s long-term earnings growth rate is 7.4%. The Zacks Consensus Estimate for ED’s 2024 sales calls for an improvement of 3.1% from the prior-year reported figure.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Consolidated Edison Inc (ED) : Free Stock Analysis Report
CenterPoint Energy, Inc. (CNP) : Free Stock Analysis Report
The AES Corporation (AES) : Free Stock Analysis Report
IDACORP, Inc. (IDA) : Free Stock Analysis Report
