NRG Energy Stays Neutral - Analyst Blog
May 13 2013 - 7:40AM
Zacks
We have maintained our Neutral
recommendation on NRG Energy Inc. (NRG). The
company currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
The reiteration is primarily based on unfavorable results in the
first quarter of 2013, and risks associated with fuel price
volatility, stringent regulations and over-reliance on weather
conditions. However, we consider NRG Energy’s diversified portfolio
of electricity generation assets, strong financial position and
efforts toward broadening the solar asset portfolio to be the
catalysts for future growth.
In the first quarter of 2013, NRG Energy Inc.’s loss per share was
wider than the Zacks Consensus Estimate and the prior-year figure
primarily owing to a rise in operating and interest expenses.
Performance of the utility providers, to a great extent, depends on
weather patterns of the region and NRG Energy is no exception.
Periods of volatile weather conditions not only affect the demand,
but severe weather conditions can cause interruptions in coal
production and transportation, thereby increasing the company’s
operating costs.
NRG Energy completed its GenOn-acquisition in Dec 2012. The company
has already experienced positive impacts out of it and anticipates
realizing $150 million of cost and operational synergies in
2013.
In addition, NRG Energy recently completed a number of projects
like Marsh Landing Generating Station and Borrego I Solar
Generating Station, and is presently in the middle of several
ventures, including Ivanpah and El Segundo Power Generating
Station. We expect completion of these projects to likely to add
momentum to the company’s forthcoming results.
Apart from investment in growth projects, strong financial position
allows NRG Energy to enhance shareholder value through increase in
dividend payments in regular intervals. Recently, the company’s
board of directors increased the rate of dividend by 33% to 12
cents per share.
Other Stocks to Consider
Other stocks from the industry that are presently performing better
include Empresa Nacional de Electricidad S.A.
(EOC) and MGE Energy Inc. (MGEE) with a Zacks Rank
#1 (Strong Buy), and ALLETE, Inc. (ALE) with a
Zacks Rank #2 (Buy).
ALLETE INC (ALE): Free Stock Analysis Report
ENDESA-CHILE (EOC): Free Stock Analysis Report
MGE ENERGY INC (MGEE): Free Stock Analysis Report
NRG ENERGY INC (NRG): Free Stock Analysis Report
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