AES Corporation’s (AES) adjusted EPS of 20 cents in the third quarter of 2010 was below the Zacks Consensus EPS estimate of 25 cents. Adjusted EPS for the quarter also fell short of the year-ago EPS of 24 cents due to higher share count, unfavorable commodity prices and a higher effective tax rate.
On a GAAP basis the company reported an EPS of 5 cents compared with 26 cents in the year-ago quarter. The 21-cent variance between adjusted and GAAP EPS came from impairments that contributed losses of 26 cents net of tax and derivative mark-to-market losses of 2 cents, offset by currency transaction gains of 13 cents.
Quarterly Operational Results
In the reported quarter, consolidated revenue increased $499 million year over year to roughly $4.2 billion, comfortably beating the Zacks Consensus Estimate of $3.7 billion. The year-over-year increase is attributed to higher rates at its generation businesses in Latin America, contributions from the company’s Cartagena business in Spain, increased demand at its utilities in Brazil, higher rates and volume at its generation business in the Philippines, higher demand and rates at its North America utility and contributions from the newly-acquired generation facility in Europe.
Gross profit increased 1.9% to $985 million, compared with $967 million in the year-ago quarter. The upside came from higher volumes at its utilities in Brazil, higher volume and rates at the company’s generation business in the Philippines, higher demand at its North America utility and $32 million of favorable foreign currency translation impact.
Financial Condition
AES Corporation reported cash and cash equivalents of $2.8 billion at the end of the reported period from $1.8 billion at year-end 2009. The company reported $996 million in cash from operating activities for the nine months ended September 30, 2010 compared with $1.0 billion of cash generated in the year-ago period. Consolidated free cash flow declined $32 million to $827 million. Long-term liabilities were flat at $23.9 billion compared to fiscal-end 2009.
Outlook
AES Corporation revised its 2010 EPS guidance range downward to 63–68 cents from 80–85 cents to reflect impairment charges recorded in the third quarter. The company expects adjusted EPS in the range of 90-95 cents per share for 2010.
AES Corporation also increased its consolidated and proportional Free Cash Flow guidance ranges for 2010 by $175 million and $50 million, respectively.
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