Expect a poor show
AES Corporation (AES) is expected to report its fourth quarter earnings on February 24, 2016. According to Wall Street analysts, AES is expected to report earnings of $0.33 per share in 4Q15—compared to earnings of $0.41 per share in 4Q14.
AES has been facing multiple headwinds for the last several quarters due to the stronger dollar and weaker Latin American segment.
AES expects its full-year 2015 earnings to be $1.18–$1.25 per share on an adjusted basis. In 2014, AES earned $1.24 per share.
Triple squeeze for AES
AES operates a power generation and distribution business in several countries. As a result, it faces currency risk. Due to the epic ascent of the US dollar in the last year, AES’s earnings were impacted negatively. In its portfolio, AES has the largest exposure to Latin America after the US. Struggling economies in Brazil, Argentina, and Columbia created a grimmer picture for AES. Weaker energy prices across the globe added to the worries for AES. This could continue to have a negative impact on the earnings.
AES operates a regulated and competitive business in the US. However, this segment has also been under pressure. It was influenced by negligible load growth and weak power prices in wholesale markets.
AES’s management expects these macroeconomic troubles to remain for the next few years. It undertook arious cost-cutting initiatives to cope with these headwinds.
Duke Energy (DUK) also has offshore assets in Latin America. It plans to sell these assets. Duke’s international business in Latin America had a poor performance due to the depressed economy. Utilities (VPU) like PPL (PPL) and Sempra Energy (SRE) also have offshore assets.