Mizuho has maintained its positive stance on AES Corp (NYSE: NYSE:AES), reiterating an Outperform rating and a price target of $24.00.
The endorsement follows AES's recent announcement on Wednesday about the sale of a 30% stake in its AES Ohio utility.
The deal, valued at approximately 1.8 times the Enterprise Value/Rate Base, is a strategic move within the company's larger $3.5 billion asset sale program. With this transaction, AES has now divested $2.7 billion of assets since 2023.
The proceeds from the sale are earmarked for debt reduction at the AES Ohio holding company, which currently carries around $800 million in debt. This debt has been affecting the company's cash flow.
Furthermore, the partnership formed through the sale is expected to support equity financing for upcoming growth projects at the Ohio utility. These projects are in anticipation of significant demand increases expected in the region towards the end of the decade.
The sale is part of AES's broader strategy to streamline its portfolio. In addition to the Ohio utility, AES has other assets under consideration for sale, including LNG and gas-to-power assets, as well as renewable energy operations in South America.
In other recent news, AES Corp has been actively reshaping its portfolio to meet future energy demands, as evidenced by its recent sale of a 30% indirect equity interest in its Ohio subsidiary to CDPQ, a Canadian pension fund, for $546 million. This transaction is part of a broader plan to achieve over $2.7 billion from its $3.5 billion asset sale target set for the period of 2023 to 2027.
AES Ohio plans to invest over $1.5 billion from 2024 to 2027 to enhance system reliability, including upgrades to transmission infrastructure and grid modernization. This is expected to meet the increasing demand for power, particularly from AI and data centers, potentially boosting AES Ohio's peak load by over 50% by the end of the decade.
Analysts at JPMorgan maintain an Overweight rating on AES Corp with a $29 target, while Evercore ISI sustains an Outperform rating. Jefferies has initiated coverage of AES Corp, assigning the stock a Buy rating, recognizing AES's shift towards US renewables and regulated utilities.
In its second-quarter earnings call, AES Corporation reported adjusted EBITDA with tax attributes at $843 million and adjusted EPS at $0.38. The company is on track to meet its 2024 financial goals, with a strong focus on renewable energy and technological advancements in the sector.
InvestingPro Insights
As AES Corp (NYSE:AES) progresses with its strategic asset sales, the company's financial health and growth prospects remain a focal point for investors. According to real-time data from InvestingPro, AES has a market capitalization of $13.69 billion and a forward P/E ratio of 17.65, which may suggest a reasonable valuation in the utility sector. Additionally, the company's dividend yield stands at an attractive 3.58%, reflecting its history of dividend growth, with a notable increase for 12 consecutive years.
InvestingPro Tips highlight that AES is expected to see net income growth this year, which is corroborated by three analysts who have revised their earnings upwards for the upcoming period. This positive outlook is also reflected in the company's significant price increase over the last six months, with a total return of 26.37%. It's important for current and potential shareholders to consider these factors, especially the company's operational performance and its ability to maintain profitability, as indicated by the analysts' profitability predictions for this year.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available for AES, which can be accessed for further guidance on the company's financial status and market performance.
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