AES’s (AES) management has lowered its adjusted earnings guidance by $0.10, from $1.05 per share to $0.95 per share for 2016. The continued devaluation of foreign currencies and pressurized commodity (DBC) prices forced management to lower its guidance.
AES is tackling these macroeconomic headwinds with active hedging and cost-cutting initiatives. Its three-year cost reduction and revenue enhancement program is expected to contribute $150 million annually. It’s also aggressively adding to its capacity, with 5,620 megawatts under construction. The majority of this generating capacity is expected to begin operation in 2018.
To streamline its business risk profile, AES has been reducing its global operations. In the last five years, it has exited ten countries.
According to Wall Street analysts, AES has an attractive estimated upside of nearly 18% in the next one year, with a price target of $11.88. It’s currently trading at $10.
Of the 13 analysts tracking AES, eight recommend the stock as a “buy,” while five recommend it as a “hold.” None of the analysts have “sell” recommendations on the stock as of February 25, 2016.
The chart above shows AES’s price targets given by analysts for the next one year. The high price target for AES is $14, which indicates an upside of 40% in one year.
Among the company’s utility (VPU) peers, Sempra Energy (SRE) has a one-year price target of $116.70, indicating a possible upside of 19%. It’s currently trading at $98.83. Pinnacle West Capital (PNW) has a price target of $67, indicating a possible downside of 4% in one year.