NRG Energy Inc. NRG is benefiting from its Transformation Plan, which aims to boost the company’s operation through cost savings, non-core assets sale and strengthening the balance sheet by redemption of long-term debts.
NRG Energy expects to generate $4 billion through assets sales under the Transformation Plan. The company anticipates majority of cash proceeds from asset sales to be generated in 2017 and the residue in 2018. The company’s annual cost savings are expected to increase from 500 million in 2018 to nearly $590 million in 2020. Margins of the company are likely to expand substantially from $30 million in 2018 to $215 million in 2020.
NRG Energy sells electricity to a wide variety of customers, while none of them accounted for more than 10% of the company’s revenue in 2016. Since the company’s revenues are not dependent on a single client, migration of customers to other operators will not dent earnings.
The company reported positive earnings surprises in two of the last four quarters, the average beat being 439.87%.. In the last 60 days, the Zacks Consensus Estimate for the company’s 2018 earnings per share rose 23.9%.
All these factors had a positive impact on the price performance of the company. Shares of the company have returned 153.8% in the last 12 months compared with the Zacks Electric Power industry’s rally of 17.6%.
In spite of implementing several pollution control measures at its facilities, the company generates nearly 28% of its total production from coal (as of Dec 31). For adhering to the stringent government regulations, NRG Energy has to invest significantly in developing low-emission facilities, which will raise operating costs.
Zacks Rank & Key Picks
NRG Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry are PNM Resources, Inc. PNM, IDACORP Inc. IDA and UNITIL Corporation UTL. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PNM Resources reported third-quarter 2017 earnings from continuing operations of 93 cents per share, beating the Zacks Consensus Estimate of 85 cents by 9.4%. Its 2017 estimates improved 0.5% to $1.86 from $1.85 in the last 30 days.
IDACORP reported third-quarter 2017 earnings from continuing operations of $1.80, beating the Zacks Consensus Estimate of $1.66 cents by 8.4%. Its 2017 estimates increased 1.7% to $4.08 from $4.01 in the last 30 days.
UNITIL posted third-quarter 2017 earnings from continuing operations of 16 cents, beating the Zacks Consensus Estimate of 11 cents by 45.5%. Its 2017 estimates increased by 2.5% to $2.03 from $1.98 in the last 60 days.
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