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NRG Energy (NRG) Gains on Diverse Customers & Debt Management
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NRG Energy Inc. (NRG - Free Report) has been gaining from the acquisition of Direct Energy and stable demand from a wide variety of customers. NRG’s focus on the generating clean energy and proper debt management through its transformational activities is likely to drive its performance in the long run.
NRG Energy acquired Direct Energy for net $3.42 billion, which advanced its customer-focused strategy and enhanced data and analytics. NRG expects to realize annual synergies of $225 million and $300 million in 2022 and 2023, respectively.
NRG sells electricity to several customers and does not need to depend on a single customer to generate revenues. Thus, the migration of customers to other operators is not going to have a significant bearing on its earnings.
NRG Energy’s total debt-to-total-capital ratio decreased to 60.2% in the second quarter of 2022 from 77.6% at the end of the second quarter of 2021. Also, its times interest earned (TIE) ratio at the end of the second quarter of 2022 improved to 11.3 from 4.3 at the end of the second quarter of 2021. A strong TIE ratio indicates that the utility will be able to meet debt obligations in the near future without any difficulty. NRG had liquidity worth $3,084 million as of Jun 30, 2022.
Headwinds
NRG operates in a highly competitive wholesale power market and needs to follow strict Federal, State and local rules and regulations. NRG Energy relies on natural gas, coal and oil to fuel most of its power-generation facilities and any disruption in fuel supplies can mar its prospects. Also, NRG is exposed to fluctuations in foreign currency. Hence, any appreciation in major currencies relative to the U.S. dollar will affect its net income.
Price Performance
In the past month, shares of NRG Energy have rallied 21.4% compared with the industry’s rise of 12.2%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are Xcel Energy Inc. (XEL - Free Report) , Alliant Energy Corporation (LNT - Free Report) and ALLETE Inc. (ALE - Free Report) , each currently carrying a Zacks Rank #2 (Buy).
The long-term earnings growth rate of Xcel Energy, Alliant Energy and ALLETE is projected at 6.4%, 6.2% and 8.7%, respectively.
The Zacks Consensus Estimate for 2022 earnings per share for Xcel Energy, Alliant Energy and ALLETE has moved up 7.1%, 6.5% and 15.5% year over year, respectively.
XEL, LNT and ALE’s respective current dividend yields of 2.5%, 2.7% and 4.1% are better than the Zacks S&P 500 composite’s average of 1.6%.
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NRG Energy (NRG) Gains on Diverse Customers & Debt Management
NRG Energy Inc. (NRG - Free Report) has been gaining from the acquisition of Direct Energy and stable demand from a wide variety of customers. NRG’s focus on the generating clean energy and proper debt management through its transformational activities is likely to drive its performance in the long run.
NRG Energy currently carries a Zacks Rank #3 (Hold). Its long-term (three to five years) earnings growth is currently pegged at 12.3%. The current dividend yield of 3.3% is better than the industry’s average of 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tailwinds
NRG Energy acquired Direct Energy for net $3.42 billion, which advanced its customer-focused strategy and enhanced data and analytics. NRG expects to realize annual synergies of $225 million and $300 million in 2022 and 2023, respectively.
NRG sells electricity to several customers and does not need to depend on a single customer to generate revenues. Thus, the migration of customers to other operators is not going to have a significant bearing on its earnings.
NRG Energy’s total debt-to-total-capital ratio decreased to 60.2% in the second quarter of 2022 from 77.6% at the end of the second quarter of 2021. Also, its times interest earned (TIE) ratio at the end of the second quarter of 2022 improved to 11.3 from 4.3 at the end of the second quarter of 2021. A strong TIE ratio indicates that the utility will be able to meet debt obligations in the near future without any difficulty. NRG had liquidity worth $3,084 million as of Jun 30, 2022.
Headwinds
NRG operates in a highly competitive wholesale power market and needs to follow strict Federal, State and local rules and regulations. NRG Energy relies on natural gas, coal and oil to fuel most of its power-generation facilities and any disruption in fuel supplies can mar its prospects. Also, NRG is exposed to fluctuations in foreign currency. Hence, any appreciation in major currencies relative to the U.S. dollar will affect its net income.
Price Performance
In the past month, shares of NRG Energy have rallied 21.4% compared with the industry’s rise of 12.2%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are Xcel Energy Inc. (XEL - Free Report) , Alliant Energy Corporation (LNT - Free Report) and ALLETE Inc. (ALE - Free Report) , each currently carrying a Zacks Rank #2 (Buy).
The long-term earnings growth rate of Xcel Energy, Alliant Energy and ALLETE is projected at 6.4%, 6.2% and 8.7%, respectively.
The Zacks Consensus Estimate for 2022 earnings per share for Xcel Energy, Alliant Energy and ALLETE has moved up 7.1%, 6.5% and 15.5% year over year, respectively.
XEL, LNT and ALE’s respective current dividend yields of 2.5%, 2.7% and 4.1% are better than the Zacks S&P 500 composite’s average of 1.6%.