On May 20, 2013, shares of NRG Energy Inc. (NRG - Analyst Report) climbed to a 52-week high of $28.34. A string of high-end investments in solar generation and the acquisition of GenOn Energy primarily lifted the company’s stock to a new high.
NRG Energy boasted of four major solar installations – the Avra Valley Solar Photovoltaic Facility and Agua Caliente Project in Ariz. as well as the California Valley Solar Ranch and Alpine Solar Generating Facility in Calif. – which came into service in 2012.
Meanwhile, the company received contract extensions last year from its clients Houston Technology Center and Washington-based St. Tammany Electric and Claiborne Electric cooperatives for delivery of power services. In addition, the company clinched two new long-term power supply commitments with Comcast and the city of Houston. We believe these contracts will ensure a stable earnings stream.
NRG Energy’s disciplined step to curb emission is evident from its continued pro-environment work on the Big Cajun generating facility in Louisiana. These initiatives enabled NRG Energy to perform well despite the challenges presented by the energy market last year.
With the renewable market dynamics becoming more favorable in the U.S., the company’s unrelenting pursuit of options to expand its solar portfolio will certainly prove to be a key growth driver.
In early 2013, NRG Energy successfully brought online its large-scale 720 megawatt Marsh Landing Generating Station in Antioch as well as the Borrego I Solar Generating Station. Also, it acquired a Gregory cogeneration plant in Corpus Christi, Texas, in agreement with Atlantic Power Corporation, John Hancock Life Insurance Company and Rockland Capital, LLC.
The current valuation also makes the shares of NRG Energy attractive. The forward price/earnings (P/E) multiple of 29.4x is higher than the peer group average of 17.4x, reflecting a premium of 69%. The Zacks Consensus Estimate for 2013 represents a projected increase of 138.7% to 95 cents from year-ago earnings of 40 cents.
Besides NRG Energy, utility stocks that are performing well and hold a Zacks Rank #2 (Buy) include ALLETE Inc. (ALE - Snapshot Report), Sempra Energy (SRE - Analyst Report) and Entergy Corporation (ETR - Analyst Report).
Headquartered in Princeton, N.J., NRG Energy together with its subsidiaries operates as an integrated wholesale power generation and retail electricity company.