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NRG Energy Stock Rides on Strategic Buyouts and Diverse Customer Base
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NRG Energy, Inc. (NRG - Free Report) is engaged in producing, selling, and delivering energy and energy products and services to residential, industrial and commercial consumers in major competitive power markets in the United States. The company’s diverse customer base and long-term customer retention strategy will further boost its performance.
However, this Zacks Rank #3 (Hold) company faces risks related to disruptions in its fuel delivery system.
NRG’s Tailwinds
NRG Energy has been expanding its operations through strategic acquisitions. The acquisition of Direct Energy and Vivint Smart Home expanded its operations. In 2023, the company exceeded goals for both growth and cost savings, witnessing more than $100 million of growth in its core businesses and more than $35 million in cost savings.
The company sells electricity to a wide variety of customers, none of whom contributed more than 10% to its revenues as of Dec 31, 2023. It has been able to retain customers and it does not depend on a single customer to generate its revenues, which adds stability and predictability to customer bills and earnings.
The company has been trying to lower the proportion of debt in the capital mix. In 2023, it reduced its debt by $900 million using cash from operations as funds. It intends to redeem $500 million worth of debt in 2024.
Management announced an increase in its share repurchase authorization to $2.7 billion, set to be executed through 2025. The company completed $1.2 billion of share repurchases in 2023. As of July 31, 2024, $1.4 billion remained under the current authorization. The ongoing share buybacks will have a positive impact on earnings per share.
Headwinds for NRG
NRG Energy’s costs, results of operations, financial condition and cash flows could be adversely impacted by the disruption of its fuel supplies as it relies on natural gas, coal and oil to fuel the majority of its power generation facilities. These facilities are subject to the risks of disruptions or curtailments in power production if no fuel is available on time due to counterparty failure to perform or if there is a disruption in the fuel delivery system.
NRG Energy is subject to extensive regulations at both the federal and state levels which could impact its operations and ability to recover costs from customers on a timely basis. Impact on the ability to recover costs from customers could adversely affect its rate of return.
Stock Price Performance
Shares of NRG Energy have gained 9.1% in the past three months compared with the industry’s 4.8% growth.
AES Corporation has been rapidly retiring its coal-fired units, thereby reducing carbon emissions from its portfolio. It has made significant progress on its coal generation exit initiatives and intends to exit the substantial majority of its remaining coal facilities by year-end 2025 and all its coal facilities by the end of 2027.
NiSource is set to retire 100% of its coal-generating sources between 2026 and 2028 and replace the production volumes with reliable and cleaner options at lower costs. The company aims to reduce greenhouse gas emissions by 90% by 2030 from the 2005 level.
DTE Energy has been investing steadily to enhance its renewable generation assets and aims to invest more than $11 billion in clean energy transition over the next 10 years. To promote clean energy, the company also has its MIGreen Power program, through which DTE Electric offers its customers the option to voluntarily source their energy usage from renewables.
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NRG Energy Stock Rides on Strategic Buyouts and Diverse Customer Base
NRG Energy, Inc. (NRG - Free Report) is engaged in producing, selling, and delivering energy and energy products and services to residential, industrial and commercial consumers in major competitive power markets in the United States. The company’s diverse customer base and long-term customer retention strategy will further boost its performance.
However, this Zacks Rank #3 (Hold) company faces risks related to disruptions in its fuel delivery system.
NRG’s Tailwinds
NRG Energy has been expanding its operations through strategic acquisitions. The acquisition of Direct Energy and Vivint Smart Home expanded its operations. In 2023, the company exceeded goals for both growth and cost savings, witnessing more than $100 million of growth in its core businesses and more than $35 million in cost savings.
The company sells electricity to a wide variety of customers, none of whom contributed more than 10% to its revenues as of Dec 31, 2023. It has been able to retain customers and it does not depend on a single customer to generate its revenues, which adds stability and predictability to customer bills and earnings.
The company has been trying to lower the proportion of debt in the capital mix. In 2023, it reduced its debt by $900 million using cash from operations as funds. It intends to redeem $500 million worth of debt in 2024.
Management announced an increase in its share repurchase authorization to $2.7 billion, set to be executed through 2025. The company completed $1.2 billion of share repurchases in 2023. As of July 31, 2024, $1.4 billion remained under the current authorization. The ongoing share buybacks will have a positive impact on earnings per share.
Headwinds for NRG
NRG Energy’s costs, results of operations, financial condition and cash flows could be adversely impacted by the disruption of its fuel supplies as it relies on natural gas, coal and oil to fuel the majority of its power generation facilities. These facilities are subject to the risks of disruptions or curtailments in power production if no fuel is available on time due to counterparty failure to perform or if there is a disruption in the fuel delivery system.
NRG Energy is subject to extensive regulations at both the federal and state levels which could impact its operations and ability to recover costs from customers on a timely basis. Impact on the ability to recover costs from customers could adversely affect its rate of return.
Stock Price Performance
Shares of NRG Energy have gained 9.1% in the past three months compared with the industry’s 4.8% growth.
Image Source: Zacks Investment Research
NRG’s Peer Prospects
Some better-ranked stocks in the industry are The AES Corporation (AES - Free Report) , NiSource Inc. (NI - Free Report) and DTE Energy Company (DTE - Free Report) . Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
AES Corporation has been rapidly retiring its coal-fired units, thereby reducing carbon emissions from its portfolio. It has made significant progress on its coal generation exit initiatives and intends to exit the substantial majority of its remaining coal facilities by year-end 2025 and all its coal facilities by the end of 2027.
NiSource is set to retire 100% of its coal-generating sources between 2026 and 2028 and replace the production volumes with reliable and cleaner options at lower costs. The company aims to reduce greenhouse gas emissions by 90% by 2030 from the 2005 level.
DTE Energy has been investing steadily to enhance its renewable generation assets and aims to invest more than $11 billion in clean energy transition over the next 10 years. To promote clean energy, the company also has its MIGreen Power program, through which DTE Electric offers its customers the option to voluntarily source their energy usage from renewables.