AES Corp Faces Stock Struggles Despite EPS Growth

Mixed Q3 earnings spark concerns for AES Corp. Shares fell post-release, despite an 18.3% growth in adjusted EPS. Investors are cautious as revenue misses expectations, which may pressure stock prices.

Date: 01-02-2025

AI Rating: 5

Earnings Per Share (EPS)
AES Corporation reported a year-over-year growth in adjusted EPS of 18.3% to $0.71 per share, which exceeded market expectations significantly by the same percentage. This positive performance could initially bolster investor sentiment. However, the underlying causes of this growth must be examined further.

Revenue Growth
Despite the strong EPS growth, AES’s revenue declined by 4.2% year-over-year to $3.3 billion, missing the expectations by 9.4%. The decline was attributed to lower non-regulated revenues and drought conditions affecting its renewable projects in South America. Such revenue shortfalls can generally create a negative outlook for the company's future, as consistent revenue is crucial for stability and growth.

Analysts’ Outlook
Analysts predict that EPS will continue to grow by 9.7% to $1.93 for the current fiscal year. The historical pattern of exceeding Wall Street estimates could lend credibility to positive future projections, yet the recent downturns may cloud this outlook. The analysts' consensus rating is a 'Moderate Buy', indicating a cautiously optimistic sentiment in light of the mixed signals the company is currently sending out.

Furthermore, Barclays' decision to maintain an 'Overweight' rating while lowering the price target to $12 signals a tempered confidence among analysts. The mean price target of $16.67 implies about a 47.9% upside from the current price, which presents an appealing opportunity for potential investors if market conditions stabilize. The highs from the Street suggesting a target of $25 indicate optimism for long-term recovery. However, the stock's recent performance, with a 10.8% drop in the day following the earnings release, poses significant risks.

Stocks: AES