AES Corporation (AES) reported fourth quarter 2010 adjusted EPS of 23 cents, lower than the Zacks Consensus EPS estimate of 25 cents. However, adjusted EPS for the quarter was 2 cents ahead of the year-ago EPS of 21 cents.
The year-over-year growth in earnings was attributable to favorable operating results in Latin America and a lower effective tax rate, partially offset by a settlement agreement for gas transportation contracts at a Latin American generation business, higher share count and increased business development costs.
On a GAAP basis, the company reported a loss of 56 cents a share compared with earnings of 7 cents a share in the year-ago quarter. The difference in GAAP and operating earnings was due to the impact of a few one-time items. These are a 76 cent impact for impairment losses, 1 cent due to currency transaction losses and 2 cents due to debt retirement losses.
AES Corporations’ 2010 operating earnings were 94 cents per share compared with $1.06 per share reported in 2009. Fiscal 2010 earnings barely failed to meet the Zacks Consensus Estimate of 95 cents as provided by 5 covering analysts.
On a GAAP basis, the company reported a loss of 11 cents a share in 2010 compared with earnings of $1.06 a share in 2009. The difference in GAAP and operating earnings was due to the impact of a few one-time items.
A negative impact of $1.07 for impairment losses and 3 cents due to debt retirement losses, countered by a gain of 4 cents due to currency transaction and a gain of 1 cent from mark to market comprised the extraordinary items.
Total Revenue
Total revenue at the end of the fourth quarter 2010 was $4.4 billion versus $3.8 billion in the year-ago quarter.
The company generated total revenue of $16.6 billion in 2010, up 19.3% from $13.9 billion reported in 2009.
The year-over-year growth in revenue is attributed to favorable foreign currency translation, increase in tariff rates and volumes at Brazilian utilities, higher rates and volumes at the company’s generation businesses in Latin America, Philippines and higher revenues from Ballylumford in Northern Ireland.
Total 2010 revenue safely surpassed the Zacks Consensus Estimate of $16.1 billion.
Financial Condition
Cash and cash equivalents at AES Corp. clocked $2.55 billion as of December 31, 2010, up from $1.78 billion at prior year end.
Cash from operating activities was $3.5 billion in 2010 versus $2.2 billion in 2009.
Total long-term liabilities as of December 31, 2010 were $21.97 billion versus $23.97 billion in 2009. Among other factors, the fall in liabilities resulted from lower non-current recourse debt.
Capital expenditures in 2010 were $2.3 billion versus $2.5 billion in 2009 resulting from lower growth capital spends in the most recent fiscal.
Guidance
The company forecasts adjusted gross margins of $4.9 billion to $5.1 billion, and general and administrative expenses of $400 million in 2011.
For 2011, AES Corporation guides adjusted earnings per share in the range of $1.08 to $1.14, and diluted earnings per share from continued operations in a band of $1.04 to $1.10.
The company expects cash flow from operating activities to be $2.8 billion to $3 billion in 2011, while free cash flow is expected to be in the range of $1.9 billion to $2.1 billion.
Maintenance capital expenditure for 2011 is expected to range from $0.85 billion to $0.95 billion.
Peer Comparison
Edison International (EIX) competes directly with AES Corporation. The former announced operating earnings for the fourth quarter 2010 of 58 cents per share, falling short of the Zacks Consensus Estimate of 61 cents and the year-ago quarter earnings of 59 cents per share.
Fiscal 2010 ongoing earnings came in at $3.48 per share, again missing the Zacks Consensus Estimate of $3.51 but beating the year-ago figure of $3.25 per share.
Our View
We note that the company successfully improved its global generation profile in 2010 through acquisitions and additions of new generation capacity.
During the year the company added 1,625 megawatts (MW) of generation capacity to its existing portfolio through acquisitions in Northern Ireland and China. The company also added another 777 MW through constructions of new projects in Asia, Europe and Latin America.
Based in Arlington, Virginia, AES Corporation operates globally and is involved in the generation, distribution, transmission, and selling of electricity to end-user customers ranging across the residential, commercial, industrial, and governmental sectors.
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