It has been about a month since the last earnings report for NRG Energy (NRG). Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is NRG due for a breakout? 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 catalysts.
NRG Energy Q3 Earnings Lag Estimates, Revenues Rise Y/Y
NRG Energy delivered earnings of $1.88 per share from continuing operations in third-quarter 2019, which missed the Zacks Consensus Estimate of $2.14 by 12.1%. However, the bottom line improved 100% from the year-ago quarter.
NRG Energy’s revenues of $2,996 million in the quarter inched up 1.2% from the year-ago quarter’s figure.
Highlights of the Release
Third-quarter adjusted EBITDA was $792 million compared with $651 million in the year-ago quarter.
As part of the Transformation Plan, the company realized $401 million in the third quarter of its 2019 cost-savings target.
Through Nov 7, 2019, the company completed share repurchases of $1.305 billion at an average price of $38.75 per share. The company has nearly $195 million remaining share repurchases under the latest $250-million share repurchase program announced in the second quarter. In total the company has allocated $1.5 billion of capital available for allocation to share repurchases in 2019.
On Sep 27, 2019, NRG Energy contributed $95 million to Petra Nova to prepay a significant portion of the project debt and fund operations.
As of Sep 30, 2019, the company had cash and cash equivalents of $243 million compared with $563 million as of Dec 31, 2018.
As of Sep 30, the company’s long-term debt and capital leases amounted to $5,798 million compared with $6,449 million as of Dec 31, 2018.
The company’s net cash from operating activities ( includes continuing operation ) in the first nine months of 2019 was $853 million compared with $671 million generated in the year-ago period.
Capital expenditure in the first nine months of 2019 was $183 million compared with $343 million in the year-ago period.
The company narrowed 2019 adjusted EBITDA guidance in the range of $1,900-$2,000 million compared with the previous expectation of $1,850-$2,050 million. It also provided 2020 EBITDA guidance of $1,900-$2,100 million. NRG Energy expects free cash flow before growth investments in the band of $1,250-$1,350 million compared with previous expectation of $1,250-$1,450 million. Free cash flow for 2020 is projected in the range of $1,275-$1,475 million.
Beginning in the first quarter of 2020, the company will increase annual dividend to $1.20 per share. It expects to target an annual dividend growth rate of 7-9%.
How Have Estimates Been Moving Since Then?
Estimates revision followed an upward path over the past two months. The consensus estimate has shifted 126.12% due to these changes.
At this time, NRG has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
NRG has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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