NRG Energy, Inc. (NRG) announced operating earnings of 43 cents per share for third-quarter 2011, beating the Zacks Consensus Estimate of 35 cents.
GAAP loss in the quarter was 24 cents versus net earnings of 87 cents in the prior-year quarter.
The difference between the GAAP and operating earnings in the reported quarter was due to a $160 million (67 cents) impairment charge related to the company's sulfur dioxide emission allowances pertaining to the acid rain program, following the release of the EPA’s final Cross-State Air Pollution Rule, as well as the challenging Texas market conditions in August.
Total Revenue
Total revenue of the company decreased marginally by 0.4% year over year to $2,674 million from $2,685 million in the year-ago quarter.
Revenue also lagged the Zacks Consensus Estimate of $3,193 million.
Operational Update
Total operating expenses of NRG Energy increased 17.9% over the prior-year quarter due to an 11.9% rise in the cost of operations.
NRG Energy's interest expenses decreased during the reported quarter to $164 million from $168 million in the year-ago quarter.
Financial Update
Cash and cash equivalents as of September 30, 2011, were $1.13 billion. The long-term debt and capital leases were $9.2 billion as of the same date.
The cash from operating activities at the end of first nine months of 2011 was $0.67 billion versus $1.14 billion in the prior-year period.
Guidance for 2011
The company updated its guidance taking into consideration its third quarter results.
The company marginally increased the 2011 EBITDA expectation to the range of $1,800–$1,850 million from the previous expectation of $1,775–$1,850 million.
Free cash flow before the growth investment is expected to be in the range of $800 million to $850 million.
Looking Forward to 2012
NRG Energy initiated EBITDA guidance in the range of $1,825 million to $2,000 million, taking into consideration the contribution from its new businesses and development assets.
Free cash flow before the growth investment is expected to be in the range of $800–$1,000 million.
Peer Comparison
The AES Corporation (AES) competes directly with NRG Energy and expected to announce its third quarter 2011 earnings results on November 4, 2011. The previous quarter earnings of the company surpassed both the Zacks Consensus Estimate as well as the year-ago figure.
The Zacks Consensus Estimates for the third quarter is 24 cents per share.
Our View
It is encouraging to see that the company has maintained a consistent healthy cash balance and is using the same to increase shareholder value through share repurchase. In the first nine months, the company repurchased 17.5 million shares at an average price of $21.6 amounting to $378 million.
During the quarter, the NRG Energy entered into a few agreements to acquire certain power generation assets and companies, aiming to enhance the power generation portfolio of the company. We appreciate the move as the acquired assets were mainly non-pollutant solar power generation units.
NRG Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Based in Princeton, New Jersey, NRG Energy Inc. operates as a wholesale power generation company. It is also involved in trade of fuel and transportation services, trade of energy, capacity, and related products in the United States and internationally.
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