We expect NRG Energy, Inc. NRG to beat expectations when it reports second-quarter 2015 results on Aug 4, before the opening bell. In the last quarter, the company posted a negative earnings surprise of 511.11%.
Why a Likely Positive Surprise?
Our proven model shows that NRG Energy is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at +40%. A favorable Zacks ESP serves as a meaningful indicator of a likely positive earnings surprise.
Zacks Rank #3 (Hold): The combination of NRG Energy’s Zacks Rank #3 and positive ESP makes us reasonably confident of an earnings beat this season.
Note that stocks with Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. Sell-rated stocks (#4 and 5), however, should never be considered going into an earnings announcement.
What is driving the Better-than-Expected Results?
NRG Energy expects to benefit from its strategic asset drop-down program, proceeds from which will be utilized to fund its ongoing infrastructure projects and share repurchase program.
In the second quarter of 2015, the company had aimed to dropdown a few more wind assets with a total capacity of 900 MW. At the end of first-quarter 2015, the company had said it expects to offer assets to its subsidiary, NRG Yield, Inc. NYLD, with anticipated equity proceeds totaling around $600 million over the remainder of 2015.
The company's aggressive share repurchase program will boost its earnings per share. NRG Energy has purchased a total of $112 million of its common stock since Dec 31, 2014 till the end of first-quarter 2015. The company enhanced its stock purchase authorization by another $81 million, leaving a total of $125 million worth of shares for repurchase at first-quarter end.
Other Stocks to Look For
Here are some other companies you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter:
Consolidated Edison, Inc. ED with an Earnings ESP of +1.56% and a Zacks Rank #3.
Entergy Corporation ETR with an Earnings ESP of +1.77% and a Zacks Rank #3.
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