Here's Why You Should Add AES Corp. (AES) to Your Portfolio
The AES Corporation’s AES divestments of operations from risky markets is a prudent step. Its growing partnerships and focus on renewables should act as growth catalysts.
Estimates for the company have been revised upward in the past 60 days, which reflects analysts’ optimism in the stock. The Zacks Consensus Estimate for 2019 and 2020 earnings has inched up 0.8% and 0.7% to $1.34 and $ 1.44 per share, respectively.
Let’s focus on the factors that make AES Corp an appropriate stock for investment.
Zacks Rank & VGM Score
The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AES Corp has an impressive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back tested results show that stocks with a favorable VGM Score of A or B coupled with a bullish Zacks Rank are best investment options.
Long-Term Growth & Long-Term Price Performance
The company’s long-term (3 to 5 years) earnings growth is pegged at 8.50%.
Shares of the company have gained on a long-term basis. The stock has rallied 23.6% in the past 36 months compared with the industry’s growth of 14.1%.
Solid Liquidity Position & Dividend Yield
AES Corp has successfully maintained a flexible liquidity position. It expects to generate $4 billion in discretionary cash during the 2019-2022 period. Apart from utilizing funds on expansion projects, a stable financial position enables the company to exercise several initiatives, including debt prepayment and refinancing, share repurchase as well as dividend payments.
Currently, the company has a dividend yield of 3.74% compared with the Zacks S&P 500 composite’s 1.98% and the industry’s 2.87%.
The company is focused on preserving its financial flexibility by reducing costs. The initiatives will include overhead reductions, procurement efficiencies and operational improvements. Since 2012, AES Corp has achieved $300 million in cost savings and revenue enhancements. Earlier in 2019, the company announced its target of generating additional annual cost savings of $100 million on the back of digital initiatives. The company expects to achieve this target by 2022. This, in turn, has raised its final target in annual savings to $500 million by 2020.
Other Stocks to Consider
Some other top-ranked stocks from the same industry are Unitil Corporation UTL, IDACORP, Inc IDA and Alliant Energy Corporation LNT. All the three stocks hold a Zacks Rank #2.
Long-term earnings growth of Unitil, IDACORP and Alliant Energy is pegged at 4.40%, 3.80% and 5.50%, respectively.
The Zacks Consensus Estimate for 2019 earnings of Unitil, IDACORP and Alliant Energy inched up 0.8%, 0.2% and 0.4% to $ 2.32, $4.47, $2.25 in the past 90 days, respectively.
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