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NRG Energy Misses on Q4 Earnings

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NRG Energy Inc. (NRG - Free Report) posted fourth-quarter 2013 adjusted earnings of 14 cents per share, missing the Zacks Consensus Estimate of 23 cents by 39.1%. Quarterly earnings decreased 53.3% year over year.

The company’s quarterly GAAP loss was 90 cents per share. In the year-ago quarter, the company reported earnings of $1.02 per share.

For 2013, adjusted loss was 37 cents per share. The Zacks Consensus Estimate was 79 cents earnings per share. The company reported earnings of 46 cents a year ago.

On a GAAP basis, NRG Energy’s loss was $1.22 per share. The prior year saw earnings of $1.22 per share.

The GAAP figure includes impairment loss incurred in 2013, while 2012 results include a bargain purchase gain associated with the GenOn acquisition.

Full-Year 2013 Highlights

For 2013, NRG Energy's total operating revenue of $11,295 million missed the Zacks Consensus Estimate of $11,703 million by 3.5%. On a year-over-year basis, top line increased 34.1% from $8,422 million.

The company’s annual total operating costs and expenses were $10,952 million, reflecting a 35.7% year-over-year increase primarily due to higher cost of operations, depreciation expenses, and selling, general and administrative expenses.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) during the year were $2,636 million, up 32.8% year over year on higher EBITDA from Wholesale-East, Wholesale-West, NRG Yield and Alternative Energy segments. This was partially offset by decreases in Retail, Wholesale Gulf Coast – Texas, Wholesale Gulf Coast – South Central, Wholesale – Other segments’ EBITDA. In 2013, Corporate segment reported a loss of $57 million.

In 2013, NRG Energy's free cash flow (before growth investments) was $1,282 million, up 57.1% from $816 million a year ago.

Operating income was $343 million in 2013, down 2% from $350 million a year ago.

Annual interest expenses increased 28.3% year over year to $848 million primarily due to a higher debt level.

In 2013, NRG Energy was able to enhance its retail customer base by approximately 65,000.

Financial Update

NRG Energy's cash and cash equivalents as of Dec 31, 2013, were $2,254 million versus $2,087 million as of Dec 31, 2012.

As of Dec 31, 2013, long-term debt and capital leases was $15,767 million versus $15,736 million as of Dec 31, 2012.

In 2013, the company’s net cash provided from operating activities was $1,270 million versus $1,149 million in the prior year.

NRG Energy’s capital expenditures decreased 41.5% to $1,987 million in 2013 from $3,396 million in the prior year.

Dividend Update

NRG Energy has raised its annual common stock dividend by 16.7% to 56 cents from the previous annualized dividend rate of 48 cents.

Acquisition Update

NRG Energy agreed to acquire substantially all of the assets of Edison International‘s (EIX - Free Report) subsidiary Edison Mission Energy (“EME”) for $2,635 million. The transaction is subject to several approvals. If approved, the acquisition will enable the company to add nearly 8,000 megawatt (MW) of capacity to its generation portfolio. The transaction is expected to be completed in first-quarter 2014.


For 2014, NRG Energy reiterated both adjusted EBITDA and free cash flow (before growth investments) projection in the range of $2,700 million to $2,900 million and $950 million to $1,150 million, respectively.

The company also provided net maintenance capital expenditures estimate for 2014 in the band of $335 million to $355 million.

Peer Comparison

American Electric Power Company Inc. (AEP - Free Report) reported fourth quarter 2013 operating earnings of 60 cents per share, beating the Zacks Consensus Estimate of 56 cents by 7.1%.

Zacks Rank

NRG Energy currently has a Zacks Rank #3 (Hold). However, a better-ranked stock in the same industry is Public Service Enterprise Group Inc. (PEG - Free Report) , which holds a Zacks Rank #1 (Strong Buy).

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