NRG Energy, Inc. ( NRG Quick Quote NRG - Free Report) continues to expand through organic and inorganic initiatives. Its diverse customer base and long-term customer retention policy increase the predictability of earnings. The company’s strategic investments will also continue to support its growth potential. Let’s focus on the factors that make this Zacks Rank #1 (Strong Buy) stock a strong investment option at the moment. Growth Projections
The Zacks Consensus Estimate for 2023 earnings per share (EPS) has moved up 26% in the past seven days to $6.31. This implies a year-over-year increase of 140.84%.
NRG Energy’s long-term (three to five years) earnings growth rate is currently pinned at 6.5%. Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing the funds to generate higher returns. Currently, NRG’s ROE is 17.12%, higher than the industry’s average of 6.16%. This indicates that the company has been utilizing the funds more constructively than its peers in the utility electric power industry.
Dividend Growth & Repurchase Program
NRG Energy increases shareholders’ value through share repurchases and dividend payment. Over the last five years, the company has increased its dividend four times on a year-over-year basis for an average annual increase of 96.41%. In April 2023, its board of directors approved a quarterly dividend of 37.75 cents per share, resulting in an annualized dividend of $1.51 per share. NRG’s current dividend yield is 4.44%, better than the Zacks S&P 500 Composite’s yield of 1.51%. At present, its dividend payout is 49%.
The company’s management had authorized $1 billion for share repurchases in December 2021, of which $645 million has been used till 2022-end. NRG has executed $653 million in share repurchases at an average price of $40.40 per share. The remaining $347 million worth of shares under the current program is expected to be repurchased in 2023. Customer Retention
In the past few years, NRG Energy has made a significant progress in its transformation to an integrated power company through its focus on customers. It sells electricity to a range of customers and none of them contributed more than 10% to its revenues as of Dec 31, 2022.
NRG has been able to retain customers due to its high-quality services. It does not depend on a single customer for revenues, which adds stability to customer bills and increases earnings predictability. Price Performance
In the past three months, the NRG Energy stock has returned 1.3% compared with the
industry’s average growth of 0.8%. Image Source: Zacks Investment Research Other Stocks to Consider
A few other top-ranked stocks from the same industry are
OGE Energy Corp. ( OGE Quick Quote OGE - Free Report) , IDACORP, Inc ( IDA Quick Quote IDA - Free Report) and NiSource Inc. ( NI Quick Quote NI - Free Report) , each holding a Zacks Rank #2 (Buy) at present. You can see . the complete list of today’s Zacks #1 Rank stocks here OGE’s long-term (three to five years) earnings growth rate is currently pinned at 17.9%. The consensus estimate for 2023 EPS stands at $2.01. The company delivered an average earnings surprise of 19.92% in the last four quarters. IDA’s long-term earnings growth rate is currently pegged at 3.68%. The Zacks Consensus Estimate for 2023 EPS stands at $5.10. The company delivered an average earnings surprise of 4.6% in the last four quarters. NI’s long-term earnings growth rate is currently pinned at 6.9%. The consensus mark for 2023 EPS stands at $1.57, implying a year-over-year improvement of 6.8%.