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NRG Energy's Cost Savings Bode Well, Regulations a Risk
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On Aug 30, 2016, we issued an updated research report on NRG Energy Inc. (NRG - Free Report) . The company is set to benefit from its asset monetization and cost saving initiatives. However, due to its heavy dependence on coal for power generation, the new EPA mandate will impact the operation of some of NRG Energy’s coal units.
NRG Energy reported adjusted loss of 4 cents in the second quarter of 2016, narrower than the year-ago loss of 6 cents. NRG Energy's operating revenues of $2,638 million in the second quarter of 2016 lagged the Zacks Consensus Estimate by 23.6% and were down 22.4% year over year.
NRG Energy is set to gain from its systematic asset drop-down and non-core asset monetization initiatives. So far this year, the company has closed asset sales of $563 million, exceeding its target of $500 million. Proceeds from the asset drop-down and divestiture programs are utilized to acquire assets that support the long-term growth objectives of the company.
NRG Energy is also well on track with its cost saving initiatives, which will have a positive impact on its margins. The FORNRG program is on track to achieve cost savings of $400 million through 2017 through reduction in administrative, marketing and development expenses as well as operating and maintenance expenditure, out of which savings of $360 million would be achieved in 2016.
On the flip side, nearly 28% of NRG Energy’s total electricity is generated from its coal-based power units. In spite of implementing several pollution control measures at these facilities, the new EPA rules are expected to impact the operations of some of its coal-fired generation units. For meeting government regulations, NRG Energy has to invest heavily in developing low-emission facilities, which will inevitably raise its operating costs.
Moreover, like any other utility operator, NRG Energy is exposed to the risk of fluctuating weather in its service territories. For instance, milder weather during the second quarter hurt demand and lowered the company’s energy margins.
Zacks Rank & Key Picks
NRG Energy currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the electric power industry are CMS Energy (CMS - Free Report) , NiSource Inc. (NI - Free Report) and DTE Energy (DTE - Free Report) . Each of these stocks currently carries a Zacks Rank #2 (Buy).
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NRG Energy's Cost Savings Bode Well, Regulations a Risk
On Aug 30, 2016, we issued an updated research report on NRG Energy Inc. (NRG - Free Report) . The company is set to benefit from its asset monetization and cost saving initiatives. However, due to its heavy dependence on coal for power generation, the new EPA mandate will impact the operation of some of NRG Energy’s coal units.
NRG Energy reported adjusted loss of 4 cents in the second quarter of 2016, narrower than the year-ago loss of 6 cents. NRG Energy's operating revenues of $2,638 million in the second quarter of 2016 lagged the Zacks Consensus Estimate by 23.6% and were down 22.4% year over year.
NRG Energy is set to gain from its systematic asset drop-down and non-core asset monetization initiatives. So far this year, the company has closed asset sales of $563 million, exceeding its target of $500 million. Proceeds from the asset drop-down and divestiture programs are utilized to acquire assets that support the long-term growth objectives of the company.
NRG Energy is also well on track with its cost saving initiatives, which will have a positive impact on its margins. The FORNRG program is on track to achieve cost savings of $400 million through 2017 through reduction in administrative, marketing and development expenses as well as operating and maintenance expenditure, out of which savings of $360 million would be achieved in 2016.
NRG ENERGY INC Price
NRG ENERGY INC Price | NRG ENERGY INC Quote
On the flip side, nearly 28% of NRG Energy’s total electricity is generated from its coal-based power units. In spite of implementing several pollution control measures at these facilities, the new EPA rules are expected to impact the operations of some of its coal-fired generation units. For meeting government regulations, NRG Energy has to invest heavily in developing low-emission facilities, which will inevitably raise its operating costs.
Moreover, like any other utility operator, NRG Energy is exposed to the risk of fluctuating weather in its service territories. For instance, milder weather during the second quarter hurt demand and lowered the company’s energy margins.
Zacks Rank & Key Picks
NRG Energy currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the electric power industry are CMS Energy (CMS - Free Report) , NiSource Inc. (NI - Free Report) and DTE Energy (DTE - Free Report) . Each of these stocks currently carries a Zacks Rank #2 (Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>