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Here's Why You Should Hold NRG Energy (NRG) in Your Portfolio

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Estimates for NRG Energy, Inc. (NRG - Free Report) have been revised upward in the past 30 days, which reflects analysts’ optimism in the stock. The Zacks Consensus Estimate for 2018 and 2019 earnings have moved up 20% and 21.6% to $3.00 and $4.72, respectively.

Shares of NRG Energy have rallied 33.6% in the past twelve months, against the industry’s decline of 5.5%. The stock carries a Zacks Rank #3 (Hold).


Let’s focus on the factors that make NRG Energy an attractive stock to hold in.

Surprise Trend & Y/Y Earnings Growth Estimates

NRG Energy pulled off an average positive earnings surprise of 219.16% in the last four quarters. Estimates for 2018 and 2019 earnings reflected year-over-year growth of 175.23% and 57.22%, respectively.

VGM Score

NRG Energy has an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back tested results show that stocks with a favorable VGM Score of A or B coupled with a bullish Zacks Rank are best investment options.

Transformation Plan

NRG Energy has initiated the three-year Transformation Plan in July 2017. This plan is designed to boost earnings, increase cost savings and raise shareholders’ value. NRG Energy continues to execute the initiatives under the plan and is on track to achieve 2018 targets. It is set to achieve $500-million cost-savings target for 2018 as part of the Transformation Plan. The plan is expected to generate further cost savings of $590 annually in 2019 and 2020.

Debt Reduction

The company cleared approximately $10-billion debt from balance sheet in 2018 as a result of the sale of the NRG Yield and Renewables segments. Total corporate debt of the company is now at $6.5 billion, down from $17 billion at the beginning of 2018. The debt reduction will lower interest payments of the company and boost margins.

Stocks to Consider

A few better-ranked stocks from the same industry that pulled off a beat this earnings season are Pinnacle West Capital Corporation (PNW - Free Report) , Ameren Corporation (AEE - Free Report) and FirstEnergy Corp (FE - Free Report) . All three stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks  #1 Rank (Strong Buy) stocks here.

Earnings of Pinnacle West Capital, Ameren and FirstEnergy beat the Zacks Consensus Estimate by 1.82%, 17.2% and 9.59% in the third quarter, respectively.

The Zacks Consensus Estimate for 2018 earnings for Pinnacle West Capital, Ameren and FirstEnergy inched up 1.9%, 0.3% and 0.4% in the past 30 days, respectively.

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