Back to top

Image: Bigstock

NRG Energy (NRG) Gains From Direct Energy Buyout & Green Goals

Read MoreHide Full Article

NRG Energy (NRG - Free Report) is likely to benefit from the Direct Energy acquisition and a deep focus on cleaner energy generation. Also, diversity in the customer base is likely to enhance its existing operations.

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $5.73, indicating a 138.75% rise from the year-ago reported figure. Also, the Zacks Consensus Estimate for 2021 revenues stands at $20.13 billion, implying a 121.42% surge from the year-earlier reported figure.

In the past six months, shares of this currently Zacks Rank #3 (Hold) NRG Energy have gained 7.4%, outperforming the industry’s growth of 7.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Six Months’ Price Performance

 

Zacks Investment ResearchImage Source: Zacks Investment Research

Tailwinds

NRG Energy’s Direct Energy acquisition will advance its customer-focused strategy, and enhance data and analytics. The buyout will create recurring synergies worth $700 million during the 2021-2023 forecast period.

None of NRG’s customers contributed more than 10% to its revenues at the end of 2020. Thus, loss of any particular customer will not significantly impact its earnings. Its transformational activities are generating enough funds to meet its current-debt obligations. NRG Energy is making efforts to gradually lower the proportion of debt in the capital mix.

NRG Energy is focusing on clean generation to curtail greenhouse gas emissions. The same plans to cut 50% emission by 2025 and achieve a net-zero emission target within 2050 from its 2014 baseline. Other utilities like Duke Energy (DUK - Free Report) , DTE Energy (DTE - Free Report) and Alliant Energy (LNT - Free Report) also have plans in place to curb the carbon footprint for a pollution-free environment. While DTE carries a Zacks Rank of 3 at present, LNT and DUK hold a Zacks Rank#2 (Buy). All three stocks are aiming to provide absolute clean energy by 2050.

DTE Energy remains committed to reducing carbon emissions from its electric utility operations by 32% within 2023, 50% by 2030 and 80% by 2040 from the 2005 carbon emissions levels. Duke Energy plans to trim carbon footprint between approximately 55% and 75% through 2035. Alliant Energy aims to retire all its existing coal-fired generation units by 2040 to lower emissions from its 2005 baseline by 50% within 2030.

Woes

Intense competition in the wholesale power markets and stringent government regulations might hurt the margins. Moreover, NRG Energy’s operations are subject to cyber-based security and integrity risks. Unplanned outages in old facilities might impede growth as well.