Zacks Investment Research downgraded shares of The AES Corporation (AES) from NEUTRAL to UNDERPERFORM on August 17, 2012, with a target price of $11.00.
Our Underperform recommendation on AES Corporation takes into account the significant international presence of its fossil fuel power plants in several emerging markets, which exposes it to both foreign currency and political risk. The company's predominantly long-term contracts pre-empt any rate base growth in the near term for its regulated utilities. Also, with lower electricity demand due to a tepid global economy, the fate of spot wholesale markets is not encouraging. The company also expects its 2012 financial performance to be adversely affected by unfavorable foreign exchange and commodity price movements and negative impact of the tariff reset at Brazilian utility Eletropaulo. As a result, we expect shares of AES Corporation to Underperform the broader equity markets in general and the utilities and merchant generators in particular.
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