Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 30 Jan, 25 | AES | Buy | USD 11.15 | USD 12.0 | USD 12.9 | 28 days | 15.7% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
The AES Corporation, together with its subsidiaries, operates as a diversified power generation and utility company in the United States and internationally. The company owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries; owns and/or operates utilities to generate or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market. It uses various fuels and technologies to generate electricity, such as coal, gas, hydro, wind, solar, and biomass, as well as renewables comprising energy storage and landfill gas. The company owns and/or operates a generation portfolio of approximately 34,596 megawatts and distributes power to 2.6 million customers. The company was formerly known as Applied Energy Services, Inc. and changed its name to The AES Corporation in April 2000. The AES Corporation was incorporated in 1981 and is headquartered in Arlington, Virginia.
Strong Asset Sale Progress: AES has achieved nearly three-quarters of its $3.5 billion asset sale proceeds target for 2027. Notably, the company closed the sale of its 47.3% equity interest in AES Brasil for approximately $630 million, signaling strong progress toward its financial goals.
Increase in Diluted EPS: AES Corporation reported a significant increase in diluted earnings per share (EPS) for Q3 2024, which rose to $0.72, up from $0.32 in Q3 2023. This 125% increase highlights improved financial performance driven by higher contributions from new renewables projects.
Decrease in Net Income: AES reported a decrease in net income to $210 million for Q3 2024, compared to $291 million in the same period in 2023. This represents a decline of $81 million, primarily driven by lower impairments and unrealized foreign currency losses, offset by higher renewables project contributions.
Decline in Adjusted EBITDA: The company’s adjusted EBITDA for Q3 2024 decreased to $692 million, down $298 million from Q3 2023. This 30% drop was largely due to lower margins in the Energy Infrastructure SBU and the impact of severe weather conditions in South America.
Key investment risks for AES Corporation include exposure to fluctuations in weather conditions and foreign currency exchange rates, potential operational disruptions in energy infrastructure projects, and the challenge of maintaining profitability amid asset sales and shifting market dynamics in the renewable energy sector.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 11.15 | 9.5 | 12.0 | 12.9 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
AES Corporation Announces Strategic Accomplishments and Q3 2024 Financial Results
AES Corporation has made significant strides in its strategic initiatives, including the signing and awarding of 2.2 GW of new contracts, primarily focused on long-term renewable Power Purchase Agreements (PPAs) and data center load growth at U.S. utilities. Of the total, 1.3 GW consists of renewables under long-term PPAs, while 900 MW represents new data center load growth at AES Ohio. The company has also completed the construction of 1.2 GW and remains on track to add a total of 3.6 GW of new projects to its operations by the end of 2024. Additionally, AES has closed or announced nearly three-quarters of its $3.5 billion asset sale proceeds target, which is set to be achieved by 2027.
Strategic Partnership and Asset Sales Progress
In a notable development, AES announced a strategic partnership with CDPQ in September 2024 to support the robust growth plans of AES Ohio. The deal involves the sale of a 30% indirect interest for approximately $546 million. Moreover, on October 31, 2024, AES completed the sale of its 47.3% equity interest in AES Brasil for approximately $630 million, including both sale and hedge proceeds. These strategic asset sales align with the company’s ongoing focus on strengthening its portfolio and advancing its growth objectives.
Financial Performance in Q3 2024
AES Corporation's third-quarter financial results for 2024 showed positive growth in several key areas. Diluted earnings per share (EPS) increased to $0.72, compared to $0.32 in Q3 2023, driven by higher contributions from renewables projects placed into service in 2024, as well as lower long-lived asset impairments. Net income was $210 million, reflecting a decrease of $81 million compared to the previous year, primarily due to lower impairments and unrealized foreign currency losses, although partially offset by increased earnings from new renewables projects. Net income attributable to AES Corporation was $502 million, a notable increase from $231 million in Q3 2023.
Adjusted Financial Results for Q3 2024
The company also reported strong adjusted financial results for Q3 2024. Adjusted EPS stood at $0.71, up from $0.60 in Q3 2023. Adjusted EBITDA, a non-GAAP financial measure, amounted to $692 million, reflecting a decrease of $298 million from the previous year, primarily due to lower margins at the Energy Infrastructure Strategic Business Unit (SBU), the end of commercial operations at Warrior Run, and severe drought conditions in South America. However, these challenges were partially mitigated by higher revenues from new renewables projects. Furthermore, AES reported adjusted EBITDA with tax attributes of $1.17 billion, a $160 million increase from the previous year, driven by higher realized tax attributes linked to the expansion of its renewables portfolio.
Outlook for Full-Year 2024
AES reaffirmed its expectations for the remainder of 2024, projecting that adjusted EBITDA with tax attributes will fall within the upper half of the previously stated range of $3.55 billion to $3.95 billion. Despite experiencing extreme weather conditions in Colombia and lower margins in the Energy Infrastructure SBU, the company remains confident in its ability to meet its financial goals, driven by new renewable projects and improved performance in other areas such as Chile. The company’s Adjusted EBITDA for the year is expected to be at the lower end of the guidance range of $2.6 billion to $2.9 billion, with significant contributions from asset sales in 2023 and 2024.
Long-Term Growth and Financial Guidance
Looking ahead, AES reaffirmed its long-term financial targets. The company expects annualized adjusted EBITDA growth of 5% to 7% through 2027, with a base from 2023 guidance. Additionally, the company is reaffirming its long-term annualized adjusted EPS growth target of 7% to 9% through 2027, with a base from 2023 guidance of $1.65 to $1.75. AES remains committed to driving its renewable energy investments and continued growth in U.S. utilities, while focusing on enhancing margins and securing tax value from its growing portfolio.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on The AES Corporation (NYSE: AES) at the closing price of USD 11.15, as on January 29, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Utilities Industry: Utilities - Diversified
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| AES The AES Corporation |
-0.03 0.24% | 12.39 | 8.16 | 5.82 | 0.68 | 2.55 | 2.92 | 13.56 |
| IBDSF Iberdrola S.A |
0.11 0.68% | 16.23 | 16.24 | 14.71 | 1.51 | 1.42 | 2.45 | 9.52 |
| IBDRY Iberdrola SA |
0.51 0.79% | 65.00 | 16.07 | 14.58 | 1.50 | 1.41 | 2.42 | 9.41 |
| ENLAY ENEL Societa per Azioni |
0.02 0.25% | 8.08 | 12.18 | 10.44 | 0.74 | 1.96 | 1.40 | 7.34 |
| ESOCF Enel SpA |
- -% | 8.16 | 12.02 | 10.42 | 0.73 | 1.95 | 1.40 | 7.34 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 29, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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