On Aug 9, we issued an updated research report on NRG Energy, Inc. (NRG - Free Report) . The company reported second-quarter 2018 earnings of 31 cents per share, missing the Zacks Consensus Estimate of 86 cents by 64%. However, total revenues were $2,922 million in the quarter, which surpassed the Zacks Consensus Estimate of $2,411 million by 21.2%.
NRG Energy continues to gain from the initiatives under the Transformation Plan. However, the company’s operations are subject to stringent environmental regulations and intense competition in the wholesale power markets.
In a year’s time, the stock has rallied 38.4%, against the industry’s decline of 3.1%.
What’s Driving NRG Energy?
NRG Energy initiated its three-year Transformation Plan in July 2017. The plan is designed to strengthen earnings, increase cost savings and boost shareholders’ value. The company expects to generate $3.2 billion through asset sales under the Transformation Plan. Also, it is on track to close asset sales worth $3 billion by the end of 2018.
NRG Energy is not only divesting assets but is also making strategic acquisitions. The XOOM Energy acquisition for $208 million, closed on Jun 1, 2018, is expected to boost annual EBITDA by $45 million and annual net income by $11 million.
Moreover, the board of directors authorized a $1-billion share buyback program, of which $500 million has been utilized to repurchase 15.7 million shares at $31.80 per share.
However, intense competition in the wholesale power markets may hurt NRG Energy’s margins. Many of the plants run by the company are old compared with the new facilities operated by competitors, resulting in a competitive disadvantage.
NRG Energy sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Utility Releases with Earnings Beat
DTE Energy (DTE - Free Report) , with a Zacks Rank #2 (Buy), reported second-quarter 2018 operating earnings per share (EPS) of $1.36, which outpaced the Zacks Consensus Estimate of $1.11 by 22.5%.
Ameren Corporation (AEE - Free Report) , with a Zacks Rank #2, reported second-quarter 2018 earnings of 97 cents per share from continuing operations, which surpassed the Zacks Consensus Estimate of 79 cents by 22.8%.
Algonquin Power & Utilities (AQN - Free Report) , with a Zacks Rank #2, posted quarterly earnings of 11 cents, beating the Zacks Consensus Estimate of 9 cents by 22.2%.
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