The AES Corporation AES focuses on increasing its renewable energy generation by adding solar, wind and battery energy storage on a regular basis to meet its long-term clean energy goals. It has also been expanding its footprint in the liquefied natural gas (LNG) market.

However, this Zacks Rank #3 (Hold) company faces risks like a decline in wholesale prices.

Tailwinds Favoring AES
 

Like other utility providers, AES has been expanding its renewable generation portfolio to gain from the growing clean energy market. In 2024, it completed the construction of 3 gigawatts (GW) of wind, solar, gas and energy storage and expects to add a total of 3.2 GW to its operating portfolio by the end of 2025.

To promote clean energy adoption, AES has also been rapidly retiring its coal-fired units, reducing carbon emissions from its portfolio. In 2024, the company retired 481 MW of coal generation in Chile and the United States.

AES operates two LNG terminals in the Caribbean. The company has long-term contracts to sell re-gasified LNG to industrial users and third-party power plants, capturing demand from industrial and commercial customers.

Headwinds Faced by AES
 

Wholesale electricity costs have fallen dramatically in recent years as a result of the growing use of renewable energy supplies, low-cost natural gas and demand-side management. New power purchase agreements for renewable power have been given in many areas at much lower costs than those awarded a few years prior. This downward trend in wholesale pricing is expected to persist, which might have a negative influence on AES' financial performance.

As of Dec. 31, 2024, AES had a long-term debt of $25.43 billion and a current debt of $3.59 billion. The company’s cash equivalents, worth $2.04 billion as of Dec. 31, 2024, remained much lower than its long-term and current debt levels.

AES Stock Price Movement
 

In the past month, shares of AES have risen 10% compared with the industry’s growth of 0.2%.

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Stocks to Consider
 

Some better-ranked stocks from the same industry are CMS Energy Corporation CMS, CenterPoint Energy CNP and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CMS’ long-term (three to five years) earnings growth rate is 7.7%. The company delivered an average earnings surprise of 4.76% in the last four quarters.

CNP’s long-term earnings growth rate is 7.1%. The company delivered an average earnings surprise of 0.76% in the last four quarters.

NiSource’s long-term earnings growth rate is 8.2%. The company delivered an average earnings surprise of 23.02% in the last four quarters.

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NiSource, Inc (NI) : Free Stock Analysis Report

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The AES Corporation (AES) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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