The AES Corporation
(
AES
) reported first quarter 2012 adjusted earnings per share (EPS) of
37 cents, 9 cents above the Zacks Consensus Estimate of 28 cents.
Earnings also comfortably surpassed the year-ago figure of 24 cents
per share.
The results were driven by a favorable one-time arbitration
settlement at Cartagena partially offset by financing costs related
to the acquisition of DP&L.
On a GAAP basis, the company clocked net earnings per share of
44 cents versus 30 cents per share in the prior-year quarter.
The variance of 7 cents between GAAP and adjusted earnings in
the reported quarter stems from currency transaction gains of 2
cents, gains from disposition/acquisition of 14 cents partially
offset by impairment losses of 6 cents and derivative
mark-to-market losses of 3 cents.
Quarterly Operational Results
In the reported quarter, consolidated revenue increased $584
million year over year to approximately $4.7 billion. However, this
fell short of the Zacks Consensus Estimate by $60 million. The
top-line increase was driven by new businesses including DP&L
in the United States, Maritza in Bulgaria, Angamos in Chile, and
Changuinola in Panama.
Moreover, increased volume at its utility and generation
businesses in Latin America, the impact of a non-recurring
arbitration settlement at Cartagena in Spain, and increased prices
at Sul in Brazil and its utility businesses in El Salvador also
added to the revenue.
However, these positive contributions were partially offset by
an unfavorable impact of foreign currency, lower prices at
Eletropaulo in Brazil, decreased spot prices at AES Gener in Chile,
and the impact of the sale of 80% of its interest in Cartagena in
February 2012.
During the quarter, gross profit increased by 8.6% year over
year to $1.1 billion. General and administrative expenses in the
quarter were $0.087 billion, down 8.4% year over year.
Financial Condition
AES Corp. ended the quarter with cash and cash equivalents of
$1.7 billion compared with $2 billion at the end of the first
quarter of 2011.
Consolidated cash flow from operating activities was up $32
million to $534 million boosted by the DP&L acquisition in the
United States and the non-recurring arbitration settlement at
Cartagena, Spain.
However, the positives were partially offset by a decrease at
its utility businesses in Latin America primarily in Brazil due to
higher working capital requirements and an increase in interest
payments due to the financing of the DP&L acquisition.
Consolidated free cash flow in the quarter was also up $32 million
year over year to $292 million.
Total capital expenditures including growth capital expenditures
were $585 million, up 17.9% year over year.
Guidance
After a 6-cent cut to the GAAP forecast due to non-cash
impairments, the company expects pro forma and GAAP EPS to remain
in the same range of $1.22 to $1.30.
For fiscal 2012, the company expects consolidated cash flow from
operating activities to be in the range of $3.1 billion to $3.3
billion and consolidated free cash flow in the range of $1.9
billion to $2.1 billion.
To deliver a three-year total return CAGR of 8% to 10% by 2015,
the company has increased the outstanding authorization for share
repurchases by $180 million from $122 million to $302 million.
The company is looking forward to initiating dividend payment in
the third quarter of 2012 with the first payment in the fourth
quarter of the year.
At the Peer
Yesterday,
Edison International
(
EIX
) reported adjusted earnings of 35 cents per share for the first
quarter of 2012, missing both the Zacks Consensus Estimate of 44
cents and the year-ago quarterly earnings of 65 cents per share.
Edison International's revenue rose $74 million year over year to
$2,856 million in the reported quarter. Revenues comprehensively
beat the Zacks Consensus Estimate of $2,793 million.
Our Take
As expected, the acquisition of DPL Inc. boosted the company's
businesses in the North American market. Moreover, with the
divestiture of Ironwood and Red Oak, sale of its interests in hydro
assets in China and strong cash flow, the company is confident that
it will reach its three-year CAGR target easily.
Meanwhile, we believe that the company's geographic
diversification makes it well-positioned for capitalizing on
regional differences in power prices and weather-driven demand and
therefore protects it from specific risks in any single region or
country.
However, we are concerned about volatility in commodity prices
and exchange rates. The company presently retains a short-term
Zacks #2 Rank (Buy). Over the longer run, we maintain our long-term
Neutral recommendation on the stock.
AES CORP (AES): Free Stock Analysis Report
EDISON INTL (EIX): Free Stock Analysis Report
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