Mixed 2Q at NRG, Guidance Reaffirmed - Analyst Blog

By Zacks Equity Research,

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NRG Energy Inc. ( NRG ) reported net income of $1.08 per share in second quarter 2012, breezing past the Zacks Consensus Estimate of 16 cents per share. Results compare favorably with 46 cents earned in the year-ago quarter.

Total Revenue   

NRG Energy's total operating revenue of $2.17 billion in second quarter 2012 decreased 4.9% from $2.3 billion in the year-ago quarter. Also, the quarterly revenue fell short of the Zacks Consensus Estimate of $2.93 billion.  

Segment Details

NRG Energy has realigned its segments into Conventional Power Generation, Retail Businesses, Alternative Energy and Corporate activities.

Following segment restructuring, Conventional Power Generation now includes the erstwhile Texas, Northeast, South Central, West segments and Other (comprising international businesses, thermal and chilled water business and maintenance operations). The Alternative Energy segment deals with solar and wind assets, electric vehicle and carbon capture businesses.

Conventional Power Generation : This segment reported second quarter 2012 adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") of $304 million compared with $320 million in the year-ago quarter.

Retail Businesses : This segment reported EBITDA of $219 million in second quarter 2012 compared with $199 million in the prior-year period.

Alternative Energy : This segment's adjusted EBITDA in second quarter 2012 was $9 million compared with a loss of $3 million in the year-ago quarter.

Corporate activities : This segment reported an EBITDA of ($4) million in second quarter 2012 compared with $1 million in the prior-year quarter.

Operational Update

NRG Energy's second quarter 2012 total operating expenses increased 12% year over year to $1.77 billion, largely due to lower cost of operations and a decline in development expenses.

Operating income increased 47.6% year over year to $397 million.

NRG Energy's interest expenses were $167 million flat year over year.

Financial Update

Cash and cash equivalents as of June 30, 2012 were $1.15 billion compared with $1.11 billion as of December 31, 2011.

As of June 30, 2012, long-term debt and capital leases were $10.49 billion versus $9.75 billion in the year-ago period.

Cash from operating activities was $585 million in the first half of 2012, up from $309 million in the prior-year period.

Capital expenditure jumped to $1.59 billion in the first half of 2012 from $0.8 billion in the year-ago period.

Free cash flow in the first six months totaled $413 million.


For the first time, the Board of NRG Energy declared a quarterly dividend of 9 cents per share to be paid on August 15 to the shareholders of record as of August 1.

Looking Forward

The company maintained 2012 adjusted EBITDA expectation in the range of $1.825 million - $2.000 billion, including wholesale and retail contribution in the range of $1.2-$1.3 billion and $625-$700 million, respectively.

The 2012 guidance for free cash flow was also reaffirmed in the range of $800 million - $1,000 million.

For 2013, adjusted EBITDA is expected in the range of $1.7-$1.9 billion, while free cash flow is projected in the range of $650-$850 million.

NRG Energy guided 2014 adjusted EBITDA in a range of $1.7-$1.9 billion and free cash flow in a range of $500-$700 million.

Peer Comparison

The AES Corporation ( AES ), which competes with NRG Energy, reported second-quarter 2012 adjusted earnings per share (EPS) of 18 cents, missing the Zacks Consensus Estimate of 26 cents and the year-ago figure of 29 cents.

The significant year-over-year decline reflects lower plant availability in Chile and the final impact of the July 2011 tariff reset at Eletropaulo in Brazil, which resulted in lower operating income. Moreover, unfavorable movements in foreign exchange rates and a higher effective tax rate also adversely impacted the quarter.

However, these negatives were partially offset by the contributions of new businesses in the United States, Bulgaria and Latin America.

Revenue decreased $243 million year over year to approximately $4,192 million. The figure also fell short of the Zacks Consensus Estimate by $500 million.

Zacks Rank

NRG Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also retain our long term Neutral recommendation.

AES CORP (AES): Free Stock Analysis Report
NRG ENERGY INC (NRG): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: AES , EPS , NRG

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