NRG Energy, Inc. NRG reported a second-quarter 2015 loss of 6 cents per share, much narrower than the year-ago loss of 30 cents per share.
The Zacks Consensus Estimate was earnings of 6 cents, which translates into a negative surprise of 200%.
Revenues
NRG Energy's operating revenues of $3,397 million lagged the Zacks Consensus Estimate of $3,688 million by 7.9%. On a year-over-year basis, the top line decreased 6.2% from $3,621 million in the second quarter of 2014.
Highlights of the Release
Total operating costs and expenses in the reported quarter were $3,165 million, down 10.4% year over year primarily due to lower cost of operations and acquisition-related transaction and integration costs.
The company’s operating income was $232 million, compared with $89 million a year ago.
NRG Energy's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were up 7.7% year over year to $729 million due to higher contribution from NRG Home Retail and NRG Yield NYLD divisions. This was partially offset by lower contribution from NRG Business, NRG Renew and Corporate.
The company incurred $263 million of interest expenses in the second quarter compared with $274 million a year ago.
Share Repurchase
In the second quarter, NRG Energy repurchased $107 million worth of shares at an average cost of $24.53. Combining the repurchases completed during the first quarter of 2015 under the Dec 2014 buyback program, the company has purchased a total of $186 million of its stock since Dec 31, 2014. It currently has $51 million worth of shares remaining under the authorized buyback capacity.
Business Update
NRG Energy has offered its publicly traded subsidiary – NRG Yield – to acquire a 75% stake in a portfolio of 12 wind projects totaling 814 MW. The transaction is expected to close in the third quarter of 2015.
NRG Energy is targeting dropdowns to NRG Yield over the second half of 2015, which will lead to $600 million in proceeds, of which $200 million is expected to be available for incremental share repurchase capacity under the previously announced capital allocation program.
Financial Condition
As of Jun 30, 2015, NRG Energy had cash and cash equivalents of $2,146 million compared with $2,116 million as of Dec 31, 2014. The company’s long-term debt and capital leases (excluding current portion) were $19,661 million as of Jun 30, 2015, compared with $19,900 million as of Dec 31, 2014.
Total liquidity was $3,988 million as of Jun 30, 2015 compared with $4,031 million as of Mar 31, 2015 and $3,940 million as of Dec 31, 2014.
In the first six months of 2015, NRG Energy’s net cash from operating activities was $458 million, up 23.8% from $370 million in the year-ago period. Capital expenditure during the period was $583 million, up 15% from $507 million in the year-ago period.
NRG Energy's free cash flow (before growth investments) in the first six months of 2015 was $274 million, down 4.2% year over year from $286 million in the year-ago period.
Guidance
For 2015, NRG Energy reiterated its adjusted EBITDA and free cash flow (before growth investments) guidance in the range of $3,200–$3,400 million and $1,100–$1,300 million, respectively.
Zacks Rank
NRG Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the utility space include Empresa Nacional de Electricidad S.A. EOC and Enersis S.A. ENI, both sporting a Zacks Rank #1 (Strong Buy)
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