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NRG Energy Inc. (NRG - Analyst Report) posted third-quarter earnings per share of 73 cents, lagging the Zacks Consensus Estimate of 80 cents by 8.8%.


NRG Energy's total operating revenues of $3.49 billion surpassed the Zacks Consensus Estimate of $2.81 billion by 24.2% and the year-ago revenue of $2.33 billion by 49.8%.

Highlights of the Release

NRG Energy’s total operating expenses were $2.95 billion, up 31.7% year over year due to higher cost of operations, depreciation charges, and selling, general and administrative expenses.

NRG Energy's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) during the quarter were $1 billion, up 47.5% year over year on favorable performances from the East, West, Alternate Energy, NRG Yield and Retail segments. These were partially offset by decreases in adjusted EBITDA from the Wholesale Gulf Coast – Texas, Other segments.

Operating income in the reported quarter was $535 million versus $86 million in the year ago quarter.

Interest expenses increased 39.9% year over year to $228 million primarily due to a higher debt level.

The company was able to enhance its retail customer base by 5,000 sequentially in the reported quarter.

Financial Update

NRG Energy's cash and cash equivalents as of Sep 30, 2013, was $2.13 billion versus $2.09 billion as of Dec 31, 2012.

As of Sep 30, 2013, long-term debt and capital leases were $15.8 billion versus $15.7 billion as of Dec 31, 2012.

Net cash provided from operating activities during the first nine months of 2013 was $0.8 billion versus $1.01 billion in the comparable year-ago period.

NRG Energy’s capital expenditures in the first nine months of 2013 were $1.58 billion, down from $2.47 billion invested in the prior-year comparable period.
During the first nine months of the year the company utilized $25 million to repurchase 0.97 million shares. NRG Energy is still left with $175 million under its authorization. However, due to the pending EME acquisition, the company might not repurchase any shares in the remaining days of 2013.


The upper end of NRG Energy's full-year 2013 adjusted EBITDA guidance was lowered marginally to the range of $2.55–$2.6 billion from $2.55–$2.7 billion guided earlier.

The company’s full-year 2013 free cash flow (before growth investments) guidance is in the range of $1.125–$1.175 billion, narrowed from the previous expectation of $1.05–$1.20 billion.

NRG Energy lowered its 2014 adjusted EBITDA to the range of $2.7–$2.9 billion from $2.85–$3.05 billion earlier. 2014 free cash flow (before growth investments) guidance is in the range of $0.95–$1.15 billion, down from the previous expectation of $1.1–$1.3 billion.

Other Company Releases

Exelon Corporation (EXC - Analyst Report) announced third quarter earnings of 78 cents per share, beating the Zacks Consensus Estimate of 66 cents by 18.2%.

American Electric Power Co. Inc. (AEP - Analyst Report) reported third quarter earnings of $1.10 per share, surpassing the Zacks Consensus Estimate of $1.08 by 1.9%.

Our View

NRG Energy missed our earnings estimates in the reported quarter. However, its focus to generate green power is appreciable.

In Oct 2013, the company decided to acquire Edison Mission Energy (EME), a subsidiary of Edison International (EIX - Analyst Report) for a purchase price of $2.64 billion. The EME buyout will add nearly 8,000 megawatt (MW) of capacity to NRG Energy’s generation portfolio and diversify its generation portfolio.

With more than 40% of the power generation from EME to come from wind power and gas-fired units, NRG Energy will be well supported to create its eco friendly generation portfolio.

NRG Energy currently has a Zacks Rank #2 (Buy).

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