NRG Energy, Inc. NRG is engaged in producing, selling, and delivering energy and energy products and services to residential, industrial and commercial consumers in major competitive power markets in the United States. The company’s diverse customer base and long-term customer retention strategy will further boost its performance.
 
However, this Zacks Rank #3 (Hold) company faces risks related to disruptions in its fuel delivery system.

NRG’s Tailwinds

NRG Energy has been expanding its operations through strategic acquisitions. The acquisition of Direct Energy and Vivint Smart Home expanded its operations. In 2023, the company exceeded goals for both growth and cost savings, witnessing more than $100 million of growth in its core businesses and more than $35 million in cost savings.

The company sells electricity to a wide variety of customers, none of whom contributed more than 10% to its revenues as of Dec 31, 2023. It has been able to retain customers and it does not depend on a single customer to generate its revenues, which adds stability and predictability to customer bills and earnings.

The company has been trying to lower the proportion of debt in the capital mix. In 2023, it reduced its debt by $900 million using cash from operations as funds. It intends to redeem $500 million worth of debt in 2024.
 
Management announced an increase in its share repurchase authorization to $2.7 billion, set to be executed through 2025. The company completed $1.2 billion of share repurchases in 2023. As of July 31, 2024, $1.4 billion remained under the current authorization. The ongoing share buybacks will have a positive impact on earnings per share.

Headwinds for NRG

NRG Energy’s costs, results of operations, financial condition and cash flows could be adversely impacted by the disruption of its fuel supplies as it relies on natural gas, coal and oil to fuel the majority of its power generation facilities. These facilities are subject to the risks of disruptions or curtailments in power production if no fuel is available on time due to counterparty failure to perform or if there is a disruption in the fuel delivery system.

NRG Energy is subject to extensive regulations at both the federal and state levels which could impact its operations and ability to recover costs from customers on a timely basis. Impact on the ability to recover costs from customers could adversely affect its rate of return.

Stock Price Performance

Shares of NRG Energy have gained 9.1% in the past three months compared with the industry’s 4.8% growth.