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NRG (NRG) Up 7.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for NRG Energy (NRG - Free Report) . Shares have added about 7.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NRG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

NRG Energy Q2 Earnings Lag Estimates, Revenues Rise Y/Y

NRG Energy delivered earnings of 70 cents per share from continuing operations in second-quarter 2019, which missed the Zacks Consensus Estimate of 78 cents by 10.3%. However, the figure improved significantly when compared with a penny registered in the year-ago quarter.  

Revenues

NRG Energy’s revenues of $2,465 million in the quarter inched up 0.2% from the year-ago quarter’s figure.

Highlights of the Release

Second-quarter adjusted EBITDA was $469 million compared with $517 million in the year-ago quarter.

As part of the Transformation Plan, the company realized $261 million in the second quarter of its 2019 cost savings target.

Through Aug 7, 2019, the company completed share repurchases of $1.25 billion that includes the $1-billion share repurchase program announced on the fourth quarter of 2018.Moreover, the Board of Directors has authorized an incremental share repurchase program of $250 million, which is expected to be executed in 2019.

The company executed approximately 1.3 gigawatts of solar power purchase agreements in the Electric Reliability Council of Texas (ERCOT).

Financial Highlights

As of Jun 30, 2019, the company had cash and cash equivalents of $294 million compared with $563 million as of Dec 31, 2018.

As of Jun 30, the company’s long-term debt and capital leases amounted to $5,794 million compared with $6,449 million as of Dec 31, 2018.

The company’s net cash provided by operating activities in the first six months of 2019 was $389 million compared with $513 million generated in the first six months of 2018.

Capital expenditure in the first six months of 2019 was $107 million compared with $282 million in the year-ago period.

Guidance

The company reaffirmed 2019 adjusted EBITDA guidance in the range of $1,850-$2,050 million and free cash flow before growth investments in the band of $1,250-$1,450 million.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, NRG has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise NRG has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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