Will The AES Corporation (AES) Disappoint This Quarter? - Analyst Blog

The AES Corporation AES is slated to release its first quarter 2014 financial results before the market bell on May 8, 2014. The company posted a positive earnings surprise of 3.57% in the preceding quarter. AES Corporation currently has a Zacks Rank #3 (Hold). Let's see how things are shaping up prior to this announcement.

Factors to Consider

AES Corporation's earnings per share in the fourth quarter were negatively impacted by poor hydrology in Panama considering 60% of its generation capacity there is hydro based. The hydrological problems are expected to continue in 2014, adversely impacting the company's performance.

However, AES Corporation continues to expand its existing operations and add new assets to its portfolio to reduce the risk exposure. In 2013, the company brought on-line 522 MW of new generation capacity, which is expected to generate earnings and cash flow from the first quarter of 2014.

Earnings Whispers

Accordingly, our proven model does not conclusively show that AES Corporation is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Negative Zacks ESP:  The Most Accurate estimate stands at 26 cents while the Zacks Consensus Estimate is pegged higher at 28 cents, resulting in a -7.14% ESP.

Zacks Rank #3 (Hold): The Zacks Rank #3 notwithstanding, the company's negative ESP does not make us confident of a likely earnings beat. Meanwhile, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement.

Other Stocks to Consider

Here are some companies in the diversified utility space having the right combination of elements to post an earnings beat this quarter.

NRG Yield, Inc. NYLD has an earnings ESP of +23.53% and carries a Zacks Rank #2 (Buy).

Ameren Corporation AEE has an earnings ESP of +6.25% and carries a Zacks Rank #3 (Hold).

Consolidated Edison, Inc. ED has an earnings ESP of +0.94% and carries a Zacks Rank #3 (Hold).