AES Stock Rises 28.6% in 6 Months: What Should Investors Do?

Core Viewpoint - The AES Corporation (AES) has outperformed the Zacks Utility-Electric Power industry, with a 28.6% increase in shares over the past six months, compared to the industry's 8.4% growth, driven by a focus on expanding its renewable generation portfolio [1][8]. Group 1: Performance and Market Position - AES is well-positioned to benefit from the increasing electricity demand from data centers, with significant power purchase agreements (PPAs) in place [2][5]. - The company has approximately 4.2 gigawatts (GW) of data center PPAs currently operational and a total of 8.2 GW in signed agreements, indicating strong growth potential [5]. - Other utilities, such as NRG Energy and Edison International, are also experiencing growth due to rising demand from data centers, with their shares increasing by 5.2% and 22.5%, respectively, during the same period [2]. Group 2: Strategic Initiatives - AES is capitalizing on the global shift to renewable energy through investments in utility-scale renewables and energy storage, supported by innovation and artificial intelligence (AI) [4]. - The company plans to convert its remaining coal units at Petersburg to natural gas by 2026, as part of its decarbonization strategy to achieve net-zero greenhouse gas emissions by 2050 [6][19]. - AES is expanding its presence in the liquefied natural gas (LNG) market through strategic projects, including the operation of the Dominican Republic's only LNG import terminal and major projects in Vietnam [9]. Group 3: Financial Performance and Estimates - The Zacks Consensus Estimate for AES' 2026 earnings per share (EPS) indicates an increase of 8.44% year over year, with a long-term earnings growth rate of 11.17% [11]. - The company has a current dividend yield of 4.75%, which is significantly higher than the Zacks S&P 500 composite's 1.41% [14]. - AES' total debt to capital ratio stands at 78.58%, which is higher than the industry average of 61.13%, and its current ratio is 0.72, indicating potential liquidity concerns [15][17]. Group 4: Valuation - AES is currently trading at a forward 12-month P/E ratio of 6.27X, which is a discount compared to its industry's 15.39X [18].