Why are AGL shares lighting up the ASX 200 with a 15% gain?

It has been an absolutely stunning day for AGL Energy Limited (ASX: AGL) shares.

In morning trade, the energy company's shares are lighting up the ASX 200 with a gain of 15%. This has taken them to a 52-week high of $11.14.

It also means they are now up a sizeable 35% since this time last year.

Why are AGL shares rocketing higher?

Investors have been scrambling to buy AGL shares today after the company revised its FY 2023 earnings guidance higher and revealed expectations for a huge jump in earnings next year.

According to the release, AGL is now expecting underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to come in at $1,330 million to $1,375 million in FY 2023. This compares to its previous guidance range of $1,250 and $1,375 million.

It is a similar story on the bottom line, with the company's underlying profit after tax (UPAT) expected to be $255 million to $285 million. This is up from its previous guidance range of $200 million to $280 million.

But what is really getting investors excited and sending AGL shares rocketing higher, is management's expectation that its UPAT will more than double in FY 2024.

Underlying EBITDA is expected to be approximately 50% higher at $1,875 million to $2,175 million, whereas UPAT is forecast to come in at $580 million and $780 million. The latter reflects a 115% to 189% increase over the midpoint of FY 2023's UPAT guidance.

This is expected to be driven by higher wholesale electricity pricing, improved plant availability, and flexibility of its asset fleet.

How does it compare to expectations?

According to a note out of Morgans earlier this year, its analysts were forecasting underlying EBITDA of $1,308 million in FY 2023 and $1,601 million in FY 2024.

AGL's guidance ranges smash both estimates out of the park, which goes some way to explaining why its shares are on fire today.

It is the same for its UPAT, with Morgans forecasting earnings of $243 million in FY 2023 and $482 million in FY 2024. AGL's guidance is well-ahead of these ranges.