The AES Corporation’s (AES) third quarter 2014 adjusted earnings per share of 37 cents beat the Zacks Consensus Estimate by 3 cents. However, operating earnings for the reported quarter were down from the year-ago figure of 39 cents by 5.1%. The company’s bottom line was hit by poor hydrology at its Brazil Strategic Business Units (SBUs) as well as plant outages at Masinloc in the Philippines.
Highlights of the Release
AES Corporation generated total revenues of $4.44 billion in the third quarter, up 11.1% year over year. The top line, however, fell short of the Zacks Consensus Estimate of $4.51 billion.
In the reported quarter, total cost of sales was $3.67 billion, up 19.7% year over year. General and administrative expenses were $45 million, down 15.1% year over year.
Interest expenses in the reported quarter were $390 million, up 8.9% year over year.
Financial Condition
AES Corp. reported cash and cash equivalents of $1.67 billion as of Sep 30, 2014 compared with $1.64 billion as of Dec 31, 2013. Non-recourse debt was $13.4 billion as of Sep 30, 2014, flattish with $13.3 billion as of Dec 31, 2013.
Cash from operating activities in third quarter 2014 was $763 million compared with $855 million in third quarter 2013. Capital expenditures in the quarter were $481 million, up from $464 million a year ago.
Proportional free cash flow, a non-GAAP measure, was $427 million in the third quarter, up 7.6% year over year.
The company repurchased 12.6 million shares for $182 million as of Sep 2014. It also boosted the repurchase authorization to $150 million that it expects to largely utilize by year end.
Asset Sale
During the third quarter, AES Corp. announced and/or closed three asset sale transactions for total proceeds of $382 million. These comprise the sale of its four operating wind projects in the UK for $161 million and a strategic deal with the Estrella-Linda Group (Estrella-Linda) for its business in the Dominican Republic, under which Estrella-Linda acquired an 8% minority interest in AES Dominicana for $96 million. Moreover, in Oct 2014, AES Corp sold its entire stake in a Turkish joint venture (JV) − AES Entek Elektrik Üretimi A.S. (AES Entek) − to its associates in the JV. Since Sep 2011, AES Corp. has exited nine countries with total proceeds of $2.4 billion.
Guidance
AES Corp. lowered its adjusted earnings guidance for 2014 to the range of $1.25−$1.31 from its earlier projection of $1.30−$1.38 per share. For 2015, it expects adjusted earnings to be in the $1.30−$1.40 per share range.
Proportional free cash flow is now expected to be in the range of $900−$1,000 million instead of $1,000−$1,300 million projected earlier. For 2015, it is expected to be between $1,000−$1,350 million.
Cash flow from operating activities for 2014 is projected between $1.8 billion and $2.2 billion ($2.2 billion to $2.8 billion earlier). For the next year, it will likely fall in the band of $2.0 billion to $2.8 billion.
The company has also reaffirmed 10% to 15% average annual cash flow growth through 2018.
Other Company Releases
Duke Energy Corp. (DUK) reported adjusted third-quarter 2014 earnings of $1.40 per share that came in below the Zacks Consensus Estimate of $1.52 by 7.9%. Quarterly earnings also decreased 4.1% from the year-ago figure of $1.46.
Edison International (EIX) reported solid third-quarter 2014 results wherein its adjusted earnings of $1.52 per share came in ahead of the Zacks Consensus Estimate of $1.35 by 12.6%. The quarterly number rose an impressive 7% from the year-ago figure of $1.42 per share.
Entergy Corp. (ETR) posted third-quarter 2014 operational earnings of $1.68 per share, in line with the Zacks Consensus Estimate. However, the reported number was down from earnings of $2.41 per share in the year-ago period.
Our Take
The company’s SBUs in the U.S., Andes and Mexico, Central America and the Caribbean improved year over year. Europe, Middle East and Africa (EMEA) also performed well. However, Brazil’s poor hydrology and Asia’s lower contributions primarily from Masinloc in the Philippines due to the sale of a minority interest in the business and forced outage led to the year-over-year shortfall.
The company continues to streamline its operations by selling its non-core assets. AES Corp. is also repurchasing its shares and prepaying recourse debt. In addition, keeping stringent regulations in mind, AES Corp is working towards making its generation portfolio environment friendly. At present, 4,741 megawatt (MW), plus 2,400 MW of environmental upgrades that are under construction, is expected to come online through 2018.
AES Corp. currently holds a Zacks Rank #3 (Hold).
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
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment