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NRG (NRG) Up 7.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for NRG Energy (NRG - Free Report) . Shares have added about 7.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NRG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

NRG Energy Q3 Earnings Beat Estimates, Revenues Fall Y/Y

NRG Energy, Inc.’s  third-quarter 2020 earnings of $1.02 per share from continuing operations beat the Zacks Consensus Estimate of $1.01 by 1%. Nevertheless, the bottom line declined 29.7% from the year-ago quarter’s figure.

Revenues

NRG Energy’s quarterly revenues logged $2,809 million, down 6.2% from the year-ago quarter’s figure.

Highlights of the Release

Third-quarter adjusted EBITDA was $752 million compared with $792 million in the year-ago quarter.

The company’s total operating costs and expenses in the quarter amounted to $2.42 billion, down 1.6% from $2.46 billion in the year-ago quarter. This upside is owing to lower cost of operations.

Operating income was $393 million, down 27.2% from $540 million in the year-ago quarter. Interest expenses of $99 million were on par with the prior-year quarter’s tally.

Financial Highlights

As of Sep 30, 2020, the company had cash and cash equivalents worth $697 million compared with $345 million as of Dec 31, 2019.

As of Sep 30, 2020, the company’s long-term debt amounted to $5,792 million compared with $5,803 million as of Dec 31, 2019.

The company’s net cash provided by operating activities in the first nine months of 2020 was $1,386 million compared with $897 million generated in the prior-year’s comparable period.

Capital expenditures in the first nine months of 2020 were $167 million compared with $183 million in the comparable period last year.

Guidance

The company narrowed 2020 adjusted EBITDA outlook to the range of $1,950-$2,050 million from the prior range of $1,900-$2,100 million. It updated its 2020 free cash flow before growth investments to the $1,450-$1,550 band from the previous range of $1,275-$1,475 million.

The company maintained 2021 adjusted EBITDA view in the range of $1,900-$2,100 million. It lowered its 2021 free cash flow before growth investments to the $1,200-$1,400 band from the previous range of $1,275-$1,475 million.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted -5.88% due to these changes.

VGM Scores

At this time, NRG has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, NRG has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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