Why AES Stock Popped Today

Key Points

• Electric utility AES beat on earnings but missed on sales last night.

• The electric utility reported positive adjusted profits -- but a GAAP loss for Q2.

• AES pays a great dividend and will probably grow fast enough to justify its share price.

• 10 stocks we like better than The AES Corporation ›

Electric utility stock The AES Corporation (NYSE: AES) is continuing to bob and weave, eluding the market downturn that's hit so many other stocks today. And what is AES's secret?

Earnings.

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AES beat forecast earnings last night, earning $0.51 per share instead of the forecast $0.40 (although it missed on revenue, which was only $2.9 billion). Shares of AES were up more than 6% at one point today, and they're hanging on to a slim 1.2% gain as of 1:55 p.m. ET.

Image source: Getty Images.

AES Q2 earnings

Not all the news is good, however, and there may be reasons for AES to continue retreating -- beyond the obvious: "Trump raised tariffs again." Digging into the report, it turns out that while AES delivered better-than-expected adjusted (i.e., non-GAAP) earnings, its results according to generally accepted accounting principles showed a $0.15-per-share loss.

Management blamed the bulk of the loss on "sales type leases at AES Clean Energy Development." The company also noted that everything from "lower margins from the Energy Infrastructure Strategic Business Unit" to "monetization of the Warrior Run coal plant PPA" weighed on results.

The short answer, though, is that AES lost money in the quarter. That's not good news.

Should you buy AES stock?

Also less than good is the fact that AES couched its forward guidance in similarly flexible "adjusted earnings" terms. AES says it will probably earn $2.10 to $2.26 this year. Analysts polled by S&P Global Market Intelligence, however, think that will translate into no more than $1.69 per share in GAAP earnings.

Still, with AES stock costing only $13 today, that works out to a P/E ratio of less than 8. For a 5.4% dividend payer with a projected 8% long-term growth rate, that's probably cheap enough to buy.

Should you invest $1,000 in The AES Corporation right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.