AES Corporation shares up 8% after Q4 earnings—Will the rally continue?

The AES Corporation has delivered a stronger-than-expected financial performance for 2024, exceeding analyst estimates and reaffirming its long-term growth strategy. The Arlington, Virginia-based energy company reported a net income of $698 million for the year, a dramatic improvement from the $182 million loss posted in 2023. Its fourth-quarter results also surpassed Wall Street forecasts, driving an 8% surge in its stock price, which reached $11.19 per share. However, despite the recent upswing, AES shares remain down by approximately 14% over the past three months.

With a firm commitment to renewable energy expansion and a growing backlog of power purchase agreements (PPAs), AES has positioned itself as a leading force in clean energy. The company has reaffirmed its annualized adjusted earnings per share (EPS) growth target of 7% to 9% through 2027, backed by a robust pipeline of projects, strong demand from artificial intelligence (AI) data centers, and an expanding footprint in the U.S. utility market.

How Did AES Perform Financially in 2024?

AES reported a diluted EPS of $2.37 for the full year of 2024, a significant increase from $0.34 in 2023. Its adjusted EPS, a key measure of profitability, stood at $2.14, exceeding the company’s earlier guidance range of $1.87 to $1.97 and marking a notable rise from $1.76 in 2023.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $2.639 billion, aligning with the company’s projected range of $2.6 billion to $2.9 billion. However, this figure represented a slight decline from the $2.828 billion reported in 2023, mainly due to operational challenges in certain markets.

Revenue for 2024 was reported at $12.278 billion, slightly missing analyst estimates of $12.650 billion. Despite this minor revenue shortfall, AES’s profitability improved significantly due to higher contributions from newly operational renewable energy projects, lower impairments, and a gain from the sale of its stake in AES Brasil.

What Are AES’s Key Strategic Achievements?

AES continued its aggressive expansion in renewable energy, signing or being awarded 6.8 gigawatts (GW) of new contracts in 2024. This included long-term PPAs for wind, solar, and energy storage, as well as agreements to supply power to AI data centers and manufacturing plants across the United States. The company’s ability to secure large-scale contracts has reinforced its standing as the world’s top corporate clean energy provider, a title recognized by BloombergNEF for the third consecutive year.

In 2024, AES completed the construction or acquisition of 3.0 GW of renewable energy projects, primarily in the United States and Chile, alongside a 670-megawatt (MW) combined-cycle gas plant in Panama. AES Ohio, a subsidiary of the company, saw rapid expansion with 2.1 GW of new data center growth, while AES Indiana received regulatory approval to implement new base rates and a return on equity (ROE) of 9.9%, strengthening its position in the U.S. utility market.

The company has also made significant progress in its asset monetization strategy, announcing or closing $2.8 billion worth of divestments from its targeted $3.5 billion asset sale plan through 2027. Key transactions included the sale of a 30% stake in AES Ohio to Caisse de dépôt et placement du Québec (CDPQ) for approximately $546 million and the sale of its 47.3% equity interest in AES Brasil for $630 million.

How Will AES Grow in 2025 and Beyond?

Looking ahead, AES has issued an optimistic 2025 earnings forecast, projecting an adjusted EPS range of $2.10 to $2.26, surpassing Wall Street’s expectation of $2.03. The company is also initiating 2025 guidance for adjusted EBITDA between $2.65 billion and $2.85 billion, with a parallel expectation for adjusted EBITDA with tax attributes in the range of $3.95 billion to $4.35 billion.

A key driver of AES’s future growth is its backlog of signed PPAs, which currently stands at 11.9 GW, with 4.9 GW already under construction. The company expects to complete 3.2 GW of new renewable energy projects in 2025, further strengthening its clean energy portfolio.

AES also reaffirmed its commitment to annualized adjusted EPS growth of 7% to 9% through 2025 and 2027, leveraging its existing projects, cost efficiencies, and strategic investments in AI-driven energy demand. CEO Andrés Gluski highlighted that AI data centers and manufacturing plants are fueling demand for energy solutions, and AES is uniquely positioned to provide power with shorter lead times.

What Challenges Could Affect AES’s Growth?

Despite its strong performance, AES faces several industry challenges, including fluctuating commodity prices, regulatory risks, and global economic uncertainties. The company’s financial results in 2024 were partially impacted by record-breaking drought conditions and power outages in Colombia, as well as lower margins in its Energy Infrastructure business unit due to contractual shifts.

Higher interest rates and borrowing costs could also present headwinds, particularly as AES continues to finance its large-scale renewable projects. However, the company remains confident in its ability to navigate these challenges through operational efficiencies, streamlined business strategies, and increased investment in high-growth markets.

How Is AES Stock Performing?

Following the announcement of its fourth-quarter results, AES shares surged by 7.85% to $11.19, reflecting investor optimism about its earnings beat and strong 2025 guidance. However, the stock has struggled over the past quarter, remaining approximately 14% lower in the last three months.

While AES’s long-term fundamentals remain strong, investor sentiment is influenced by broader market trends and the energy sector’s ongoing transition to renewables. Analysts will closely watch the company’s execution of its clean energy projects and its ability to maintain profitability while managing operational risks.

Is AES Positioned for Continued Growth?

AES Corporation’s strong financial performance in 2024 and its ambitious plans for 2025 underscore its strategic positioning in the evolving energy landscape. With a robust renewable energy pipeline, rising demand from AI-driven industries, and a disciplined financial approach, the company is well-equipped to sustain growth in the coming years.

As AES continues to execute its clean energy strategy, its ability to balance expansion with financial prudence will be key in determining long-term success. Investors will be watching closely to see how the company navigates economic uncertainties while capitalizing on emerging opportunities in the renewable energy market.