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NRG Energy's (NRG) Investments, Clean Energy Goals Bode Well

NRG Energy NRG is likely to benefit from the Direct Energy acquisition and its completed three-year Transformation Plan. Also, focus on cleaner energy generation is likely to further enhance its existing operations.

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $6.46, indicating a 169.2% rise from the year-ago reported figure while that of 2022 stands at $6.61, suggesting 2.3% growth from the prior-year reported number. Also, the Zacks Consensus Estimate for 2021 revenues is pegged at $12.1 billion, implying a gain of 33.1% from the year-earlier reported figure while that of 2022 is $11.9 billion, hinting at 1.8% dip from the year-ago reported figure.

Tailwinds

NRG Energy continues to benefit from its three-year Transformation Plan, which was designed to strengthen earnings, increase cost savings and its boost shareholder value. Also, in January this year, the utility closed the acquisition of Direct Energy for net $3.42 billion. This deal will advance its customer-focused strategy and enhance data and analytics besides creating recurring synergies worth $300 million and reducing integration costs by $220 million.

Notably, the company does not depend on a single customer as none of the customers contributed more than 10% to its revenues as of Dec 31, 2020. Thus, the loss of any particular customer will not significantly impact its earnings.

Though the company’s debt is higher than the industry average, its transformational activities are generating enough funds to meet its current-debt obligations. Also, it is making efforts to slowly lower the proportion of debt in the capital mix. Moreover, a significant portion of debt increase in 2020 was related to the buyout of Direct Energy.

NRG Energy is focusing on clean generation to lower greenhouse gas emissions. It targets a 50% emission cut by 2025 and net-zero emissions within 2050 from the 2014 baseline. Apart from the company, utilities like Duke Energy DUK, DTE Energy DTE and Avista Corporation AVA made plans to curb carbon footprint for a pollution-free environment.

Woes

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

Zacks Rank & Price Performance

This currently Zacks Rank #3 (Hold) stock has gained 19.8% outperforming the industry’s increase of 4.9% in the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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Avista Corporation (AVA): Free Stock Analysis Report
 
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