NRG Energy’s NRG cost-saving initiatives, acquisitions, service to wide customer base and share buyback strategy will boost its performance in the long term.
Let’s focus on the factors that make NRG Energy an attractive investment pick.
Zacks Rank & VGM Score
The stock sports a Zacks Rank #1 (Strong Buy) and has an impressive VGM score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back tested results show that stocks with a favorable VGM Score of A or B coupled with a bullish Zacks Rank are best investment options.
Growth Expectation & Surprise History
The Zacks Consensus Estimate for 2019 earnings per share (EPS) is pegged at $3.89, which indicates year-over-year growth of 61.41%. The consensus mark for 2020 earnings is at $5.48, which calls for a rise of 40.96% from year-ago levels.
Its long-term (three to five years) EPS growth is projected at 36.30%. NRG Energy pulled off a positive average earnings surprise of 11.64% in the last four quarters.
Transformation Plan & Debt Reduction
NRG Energy has initiated its three-year Transformation Plan to strengthen earnings, increase cost savings and boost shareholder’s value. These initiatives are expected to be fully implemented by the end of 2020.
Under this plan, the company is on track to realize $590 million of cost savings and $135 million of margin enhancements in 2019. Moreover, the company has completed $600-million debt reduction and achieved its targeted investment grade credit metrics. NRG Energy’s refinancing and debt-reduction activities in the second quarter will generate more than $25-million annual interest savings.
Share Repurchase
Through Aug 7, 2019, NRG Energy completed share repurchases of $1.0 billion. In the same month, the company announced that its board of directors has authorized an additional $250 million of share repurchases to be executed in the second half of 2019. The ongoing buyback of shares will likely boost shareholders’ value.
Acquisitions Expand Operation
Courtesy of the Stream Energy acquisition in August, the company added nearly 600,000 Residential Customer Equivalents (RCEs) in nine states and the District of Columbia. This is expected to expand the company’s customer base significantly and be accretive to earnings.
Price Performance
Shares of NRG Energy have increased 17.2% in the past three months compared with the industry’s rise of 6.6%.
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Other Stocks to Consider
Some other top-ranked stocks from the same space are American Electric Power Company AEP, Duke Energy Corp. DUK and Alliant Energy Corp. LNT. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Electric Power’s long-term earnings growth is projected at 5.66%. The Zacks Consensus Estimate for 2019 EPS has inched up 0.2% in the past 90 days to $4.14.
Duke Energy’s long-term earnings growth is projected at 4.88%. The Zacks Consensus Estimate for 2019 EPS has moved up 1.8% in the past 90 days to $4.98.
Alliant Energy’s long-term earnings growth is projected at 5.54%. The Zacks Consensus Estimate for 2019 EPS has moved up 0.4% in the past 90 days to $2.26.
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