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What's in Store for NRG Energy (NRG) this Earnings Season?

Diversified energy company NRG EnergyNRG is scheduled to report fourth-quarter results on Feb 29, before market opens. Last quarter, the company had reported a negative earnings surprise of 77.22%. Let's see how things are shaping up for this quarter.

Factors to Consider

Extreme weather conditions drive demand for electricity companies, while milder-than-usual temperatures lower electricity consumption and hurt revenues. This winter turned out to be warmer than the last, which is likely to dent demand as well as revenues in the to-be-reported quarter.

On the bright side, NRG Energy has implemented cost reduction initiatives in a bid to survive the challenging commodity environment. The program calls for total cost savings of $250 million, which includes savings of $Array50 million per year in general and administrative, and marketing and development expenses; and $Array00 million per year in operations & maintenance (O&M) expenses.

Earnings Whispers

Our proven model does not conclusively show that NRG Energy will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #Array (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -7Array.05%. This is because the Most Accurate Estimate stands at ArrayArray cents, while the Zacks Consensus Estimate is pegged higher at 38 cents.

Zacks Rank: Though NRG Energy's Zacks Rank #3 increases the predictive power of ESP, the company's negative ESP makes a surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here is one operator in the utility sector worth considering on the basis of our model, which has the right combination of elements to post an earnings beat this quarter:

Spark Energy Inc. SPKE with an Earnings ESP of +47.27% and a Zacks Rank #Array.

On the basis of our model, we may also consider two operators from the alternate energy space:

JinkoSolar Holding Co. Ltd. JKS with an Earnings ESP of +5.22% and a Zacks Rank #3.

Canadian Solar Inc. CSIQ with an Earnings ESP of +5.80% and a Zacks Rank #3.

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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

NRG ENERGY INC (NRG): Free Stock Analysis Report

JINKOSOLAR HLDG (JKS): Free Stock Analysis Report

CANADIAN SOLAR (CSIQ): Free Stock Analysis Report

SPARK ENERGY (SPKE): 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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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