NRG (NRG) Up 14.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for NRG Energy (NRG). Shares have added about 14.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NRG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

NRG Energy Q1 Earnings Lag Estimates, Revenues Down Y/Y

NRG Energy delivered earnings of 55 cents per share from continuing operations in first-quarter 2020, which missed the Zacks Consensus Estimate of 75 cents by 26.6%. Nevertheless, the bottom line increased 61.7% from the year-ago quarter’s figure.    

Revenues

NRG Energy’s quarterly revenues amounted to $2,019 million, down 6.7% from the year-ago quarter’s figure.

Highlights of the Release

First-quarter adjusted EBITDA was $349 million compared with $333 million in the year-ago quarter.

The company changed its business segments from Retail and Generation to Texas, East and West/Other in the beginning of first-quarter 2020.

It has achieved 41% Greenhouse Gas (GHG) emissions reduction since 2014.

The company’s total operating costs and expenses in the quarter amounted to $1.78 billion, down 8.7% from $1.95 billion in the year-ago quarter.

Operating income was $244 million, up 10.4% from $221 million in the year-ago quarter. Interest expenses amounted to $98 million, down 14% from $114 million in the prior-year quarter.

Financial Highlights

As of Mar 31, 2020, the company had cash and cash equivalents of $759 million compared with $345 million as of Dec 31, 2019.

As of Mar 31, 2020, the company’s long-term debt and capital leases amounted to $5,807 million compared with $5,803 million as of Dec 31, 2019.

The company’s net cash from operating activities in the first three months of 2020 was $208 million compared with net cash used in operating activities of $91 million generated in the year-ago quarter.

Capital expenditures in the first three months of 2020 were $66 million compared with $49 million in the year-ago quarter.

Guidance

The company reaffirmed its 2020 adjusted EBITDA guidance in the range of $1,900-$2,100 million. It also anticipates free cash flow before growth investments in the range of $1,275-$1,475 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, NRG has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NRG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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