We have maintained our Neutral recommendation on
NRG Energy Inc.
). 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
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
Empresa Nacional de Electricidad S.A.
MGE Energy Inc.
) with a Zacks Rank #1 (Strong Buy), and
) with a Zacks Rank #2 (Buy).
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