NRG Energy, Inc.
) has entered into an agreement with Goal Zero, a leader in
personal solar products, for acquiring the latter for an
undisclosed amount. Upon customary approvals, the transaction is
expected to be completed in the third quarter of 2014.
Despite the declining trend after reporting unfavorable
second-quarter 2014 results on Aug 7, 2014, the market reacted
positively to the acquisition news with the share price gaining a
marginal 0.4% to close at $29.42 on Aug 14, 2014 from the previous
day's closing. However, the share price was again down 0.9% on Aug
15 to close at $29.16.
Headquartered in Salt Lake City, Goal Zero provides different kinds
of solar power products, including power packs, solar panels, solar
kits and several other accessories, to its customers. Currently,
the firm markets a set of portable solar power and battery-pack
products and accessories. Goal Zero is presently expanding its
operations in the outdoor and adventure sports segment.
If approved, NRG Energy will merge Goal Zero with its NRG Home
division. During the second-quarter 2014 earnings call, the company
announced that it will reorganize its retail, residential solar and
home product and services businesses into NRG Home.
NRG Energy's efforts to boost its product portfolio under the
proposed NRG Home division are appreciable. Earlier, on Mar 27,
2014, the company acquired New Jersey-based Roof Diagnostics Solar,
which engages in selling and installing rooftop solar panels.
During the second quarter, NRG Energy's retail customer count
increased by 35,000 across both Texas and the Northeast. In
addition, the company added 500,000 customers to its portfolio
through the acquisition of the competitive retail electric business
of Dominion Resources, Inc. (
). The proposed Goal Zero acquisition will enable the company to
meet increasing customer demand, besides providing a wide array of
products and services.
The addition of Goal Zero will strengthen NRG Energy's domestic
market through the utilization of Goal Zero's distribution channels
and customer bases along with exploring cross-selling
opportunities. In addition, NRG Energy can penetrate into new
territories by leveraging Goal Zero's presence in the sub-Saharan
Africa. This will enable the company to expand its revenue stream.
NRG Energy continued to miss the consensus estimate in the second
quarter of 2014 as well. A steady rise in operating expenses is our
primary cause of concern as they eat into the company's margins. In
the second quarter, total operating expenses jumped 33.7% year over
year to $3.5 billion, primarily due to higher cost of operations
and depreciation expenses. An inability on the part of the company
to curb its rising cost burden will affect future results.
NRG Energy currently holds a Zacks Rank #5 (Strong Sell). However,
some better-ranked stocks in the industry include ALLETE, Inc. (
) and CMS Energy Corp. (
), each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
CMS ENERGY (CMS): Free Stock Analysis Report
DOMINION RES VA (D): Free Stock Analysis Report
NRG ENERGY INC (NRG): Free Stock Analysis
ALLETE INC (ALE): Free Stock Analysis Report
To read this article on Zacks.com click here.