We expect utility company
NRG Energy Inc.
) to beat expectations when it reports second-quarter 2013
results before the market opens on Aug 9, 2013.
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Why a Likely Positive Surprise?
Our proven model shows that NRG Energy is likely to beat earnings
because it has the right combination of key factors.
Positive Zacks ESP:
Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
), which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is +3.33%. This is
meaningful and a leading indicator of a likely positive earnings
surprise for this company.
Zacks #3 Rank (Hold):
The stocks with Zacks Ranks of #1, 2 and 3 have a significantly
higher chance of beating earnings. The Sell rated stocks (#4 and
5) should never be considered going into an earnings
The combination of NRG Energy's Zacks Rank #3 (Hold) and +3.33%
ESP make us confident of a positive earnings beat on Aug 9.
What is Driving Better-than-Expected Earnings?
We believe that the positive impact from the GenOn-acquisition,
in terms of enhancement in operational efficiencies and cost
synergies, will play a vital role in improving NRG Energy's
performance. In 2013, the company expects to realize $150 million
of cost and operational synergies from this transaction.
Recently, NRG Energy entered into a contract-extension agreement
with two clients - Houston Technology Center and St. Tammany
Electric and Claiborne Electric co-operatives, to provide power
services. The company also signed two new long-term power supply
commitments with Comcast and the city of Houston. We believe
these initiatives will help to provide a secured earnings flow in
the near future.
In addition, NRG Energy's two solar photovoltaic (PV) facilities
- Kansas South and TA-High Desert projects - have started
commercial operation. These two projects have power generation
capacity of 20 megawatts (MW) each. NRG Energy will sell the
) subsidiary Pacific Gas and Electric Company and
) unit Southern California Edison.
Other Stocks to Consider
NRG Energy is not the only organization looking up this earnings
season. We see another utility player which is likely to beat
Great Plains Energy Incorporated
), Earnings ESP of +2.56% and Zacks Rank #3 (Hold).