AES Corporation’s (AES) adjusted EPS of 23 cents in the second quarter of 2010 flew past the Zacks Consensus EPS estimate of 21 cents. However, adjusted EPS for the quarter fell short of the year-ago EPS of 28 cents. On a GAAP basis the company reported EPS of 18 cents compared with 45 cents in the year-ago quarter.
The 5-cent variance in adjusted and GAAP EPS came from currency transaction loss of 5 cents, and debt retirement loss of a penny. This was partially offset by a penny from derivative mark-to-market gain.
Quarterly Operational Results
In the reported quarter, consolidated revenue increased $730 million to approximately $4 billion, comfortably beating the Zacks Consensus Estimate of $3.8 billion. Of that increase, $225 million was attributable to favorable foreign currency translation impacts, particularly the Brazilian Real. Further improvements to revenue resulted from an increase in tariff rates in Latin America, increased volumes at Brazilian utilities; higher rates and volumes in Asia and Latin America.
Gross profit increased 22% to $982 million, compared with $803 million in the year-ago quarter. The upside came from higher volumes and pricing in Latin America and Asia and favorable foreign exchange rates. Net income was $429 million compared with $531 million in the year-ago quarter.
Financial Condition
AES Corporation reported cash and cash equivalents of $2.9 billion at the end of the reported period from $1.7 billion at the end of the year-ago quarter. The company reported $1.4 billion in cash from operating activities in the first half of 2010 compared with $874 million of cash generated in the year-ago period. Consolidated free cash flow increased to $588 million compared with $408 million at the end of the second quarter of 2009. Long-term liabilities decreased to $23.6 billion from $24 billion at fiscal-end 2009.
Outlook
AES Corporation revised downward its EPS guidance range to $0.80–$0.85 from $0.83–$0.88 to reflect higher unrealized foreign currency transaction losses.
We retain a short-term Zacks #3 Rank for the stock, which translates into a Hold rating of the stock.
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