NEW YORK (TheStreet) -- AES (AES) shares were initiated with an "equal weight" rating by analysts at Morgan Stanley (MS) on Thursday.
The firm set a price target of $15 on the diversified power generation company's shares, suggesting a potential upside of 10.4% over the company's closing price yesterday.
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TheStreet Ratings team rates AES CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate AES CORP (AES) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AES's revenue growth trails the industry average of 24.1%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- AES CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AES CORP turned its bottom line around by earning $0.39 versus -$1.30 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $0.39).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 170.7% when compared to the same quarter one year ago, falling from $82.00 million to -$58.00 million.
- The debt-to-equity ratio is very high at 5.12 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, AES has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: AES Ratings Report