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AGL share price rebounds on the ASX

The AGL Energy Limited (ASX: AGL) share price has lifted 1.74% higher this morning as it rebounds from its fall in yesterday’s trade.

Why is the AGL share price surging higher?

The Aussie energy company’s stock is rebounding today, following its FY20 earnings update yesterday morning.

The AGL share price fell 1.13% yesterday after the company’s Investor Day and FY20 guidance reconfirmation.

AGL’s underlying profit after tax is expected to be $780 million to $860 million for the year ended 30 June 2020.

AGL cited “market challenges” including higher depreciation and the impact of outages at its Loy Yang Unit 2 power station as factors behind the update. Lower wholesale electricity prices and higher fuel costs in FY20 are also expected to weigh on company earnings.

Investors weren’t impressed with the forecast, as the AGL share price closed 1.13% lower yesterday at $19.48 per share.

How has the AGL share price performed in 2019?

AGL shares have edged 1.58% lower so far this year, despite hitting as high as $23.21 in May 2019.

Elevated east coast electricity prices have supported the company’s share price, despite government energy reforms looming large.

The recent change of CEO and a weaker August full-year result have also put the AGL share price under pressure in 2019.

Should you buy AGL shares?

AGL shares are trading at 14.5x earnings with a market cap of nearly $13 billion at the time of writing.

I think there could be better value ASX Energy sector buys in 2020, such as Origin Energy Ltd (ASX: ORG) or Santos Ltd (ASX: STO).

Origin Energy shares have climbed 25.16% higher in 2019 but still remain comparatively cheaper than AGL. The Origin Energy share price is trading at 11.5x earnings with a similar market cap of $13.9 billion.

Santos shares have also performed well this year and are up a whopping 53.79% since January. While more expensive at 18.5x earnings, Santos is also offering a 2.15% dividend yield with a larger market cap of $16.9 billion.

Foolish takeaway

The Energy sector has historically been defensive and could be a good buy if we hit a recession in 2020, which is why I think AGL shares could be a good recession-proof investment, but they might be a little pricey at the moment.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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