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.

AES’ Tailwinds
 

Like other utility providers, AES has been expanding its renewable generation portfolio to gain the benefits of the growing clean energy market. During the third-quarter 2024, it completed the construction of 1.2 gigawatts (GW) of wind, solar, gas and energy storage and expects to add a total of 3.6 GW to its operating portfolio by the end of 2024.

To promote clean energy adoption, AES Corp. has also been rapidly retiring its coal-fired units, reducing carbon emissions from its portfolio. In 2023, the company exited or announced the sale or closure of 2.1 GW of coal generation in Vietnam, the United States and Chile.

AES is also focusing on its growth in the LNG market by operating the only LNG import terminal in the Dominican Republic, Andres, with 160,000 cubic meters of storage capacity. 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. Furthermore, 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.

AES had a long-term debt of $24.51 billion as of Sept. 30, 2024. Its current debt is worth $4.95 billion as of Sept. 30, 2024. The company’s cash equivalents, worth $2.54 billion as of Sept. 30, 2024, remained much lower than its long-term and current debt levels. This implies that AES has a weak solvency position.

AES Stock Price Movement
 

In the past month, shares of AES have fallen 14.4% against the industry’s growth of 5.3%.

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Stocks to Consider
 

Some better-ranked stocks from the same industry are Vistra VST, which sports a Zacks Rank #1 (Strong Buy), and Avangrid Inc. AGR 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 stocks here.

Vistra’s long-term (three to five years) earnings growth rate is 17.4%. The company delivered an average earnings surprise of 7.05% in the last four quarters.

Avangrid’s long-term earnings growth rate is 6%. The company delivered an average earnings surprise of 43.82% in the last four quarters.

NiSource’s long-term earnings growth rate is 7%. The company delivered an average earnings surprise of 22.43% in the last four quarters.

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