Should You Add AES Stock to Your Portfolio Before Q4 Earnings Release?

The AES Corporation AES is expected to report fourth-quarter 2025 results on Feb. 26, after market close. 

The Zacks Consensus Estimate for earnings is pegged at 62 cents per share, indicating growth of 14.81% from the year-ago reported figure. The consensus mark for revenues is pinned at $3.49 billion, indicating growth of 17.83% from the year-ago reported figure.

AES’ Earnings Surprise History

The company beat on earnings in two of the trailing four quarters and missed in the other two, delivering an average surprise of 14.68%.

What Our Quantitative Model Predicts

Our proven model predicts an earnings beat for AES this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here, as you will see below.

Earnings ESP: The company’s Earnings ESP is +0.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Boeing carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Recent Utility Releases 

CenterPoint Energy, Inc. CNP reported fourth-quarter 2025 adjusted earnings of 45 cents per share, which missed the Zacks Consensus Estimate of 46 cents by 1.1%. However, the bottom line increased 12.5% from 40 cents in the year-ago quarter.

Duke Energy Corporation's DUK fourth-quarter 2025 earnings of $1.50 per share lagged the Zacks Consensus Estimate of $1.51 by 0.6%. The bottom line also declined 9.6% from $1.66 reported in the year-ago quarter.

Factors That Might Have Impacted AES’ Q4 Performance

The company is expected to have continued to benefit from its strategic investments in infrastructure modernization and grid resilience, which have enhanced operational efficiency and reliability across its service territories. Solid sales growth, ongoing cost-saving initiatives and favorable returns from renewable energy and utility operations are likely to have boosted the overall performance in the to-be-reported quarter.

Increasing electricity demand from data centers, driven by artificial intelligence workloads, is expected to have provided additional support to the company’s quarterly earnings. Favorable rate outcomes approved in previous quarters might have further strengthened regulated utility revenues and offset inflationary or cost pressures. The company’s quarterly performance is also expected to have benefited from new projects, which likely started contributing a full quarter of revenue.

AES experienced mixed temperature trends across its service territories during the October–December period. Most regions recorded above-normal temperatures, which must have reduced electricity demand for heating purposes in winter and weighed on the company’s top-line performance.

AES Stock Price Performance

In the past three months, the stock has returned 17.7% compared with the industry’s growth of 3.2%.

AES Stock Trading at a Discount

The company is currently trading at a discount compared to its industry on a forward 12-month P/E basis.

AES ROE Higher Than the Industry

AES’ trailing 12-month return on equity of 18.83% is higher than the industry average of 10.7%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.

Investment Thesis

AES is taking advantage of the global transition to renewable energy by making strategic investments in clean energy solutions, such as energy storage and utility-scale renewables, which offer a long-term growth opportunity. 

The company is also benefiting from the increased demand from data centers, a market that is expanding quickly due to AI and cloud computing. By supplying power from its renewable energy projects, AES secures long-term contracts (Power Purchase Agreements or PPAs) and positions itself as a key partner in the tech industry's expansion.

Wholesale electricity prices have fallen in recent years due to higher renewable penetration, low natural gas prices and demand-side management, with new renewable PPAs being signed at much lower rates than before. This continuing decline in wholesale prices could have materially hurt the company’s financial performance.

End Note

AES continues to lead the utility industry’s clean energy transition, emphasizing sustainable growth, innovation, and strong financial performance. As the entire world is progressing toward a 100% carbon-neutral environment, the company has been expanding its renewable generation portfolio. 

Given its earnings growth projection, strong ROE, better price performance and discounted valuation, new investors may consider adding AES stock to their portfolio right now. 

 

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This article originally published on Zacks Investment Research (zacks.com).

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