AES Corp (AES) to Post Q2 Earnings: Is a Beat in Store?

The AES CorporationAES is set to release second-quarter 2018 results, before the opening bell on Aug 7.

In the last reported quarter, the company delivered a positive earnings surprise of 12%. Moreover, it surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 12.05%.

Let's see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise

Our proven model shows that AES Corp. is likely to beat estimates this quarter. Notably, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Impressively, the company has these attributes, as mentioned below:

Earnings ESP : The company has an Earnings ESP of +3.01%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : AES Corp. currently carries a Zacks Rank #3, which along with a positive Earnings ESP indicates at possible earnings beat.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The AES Corporation Price and EPS Surprise

The AES Corporation Price and EPS Surprise | The AES Corporation Quote

Factors at Play

At the end of first-quarter 2018, the company completed the sale of its entire equity interest in its Philippines businesses for $1.05 billion. Subsequently, in the second quarter, it completed the sale of its stake in a Brazilian utility for $310 million. The company intends to use the cash proceeds to reduce its debt. To this end, we may expect the company's second-quarter results to duly reflect such debt reduction initiatives in the form of lower interest expenses.

In April 2018, AES Corp.'s 671 MW combined-cycle gas turbine natural gas plant started commercial operations. Such projects that are coming online are likely to boost the company's bottom line. In keeping with this, the Zacks Consensus Estimate for earnings, pegged at 28 cents per share, reflects a year-over-year improvement of 12%.

In the months of April and May 2018, majority of AES Corp.'s service territories experienced colder-than-normal and warmer-than-normal temperatures, respectively, thereby indicating higher electricity demand. However, in June, below-normal summer was witnessed, which may lower electricity demand and in turn hurt AES Corp.'s top line in the second quarter. The Zacks Consensus Estimate for the company's second-quarter revenues, pegged at $3,406 million, reflects a decline of 1.8% year over year.

Other Stocks That Warrant a Look

Here are some other companies from the Utility sector you may want to consider as our model shows that these have the right combination of elements to post earnings beat this quarter:

Southwest Gas Corporation SWX has an Earnings ESP of +4.84% and carries a Zacks Rank #2. It is expected to report second-quarter results on Aug 6. You can see the complete list of today's Zacks #1 Rank stocks here .

OGE Energy Corporation OGE has an Earnings ESP of +4.39% and carries a Zacks Rank #3. It is slated to report second-quarter results on Aug 9.

Recent Utility Release

Public Service Enterprise Group PEG or PSEG reported second-quarter 2018 adjusted operating earnings of 64 cents per share, which exceeded the Zacks Consensus Estimate of 62 cents by 3.2%.

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The AES Corporation (AES): Free Stock Analysis Report

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Southwest Gas Corporation (SWX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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