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NRG Energy's (NRG) Transformation Plan Propel It to New High

NRG Energy NRG has gained 70.4% in the last year against 4.4% decline of its industry. This Zacks Rank #3 (Hold) stock reported positive earnings surprise in two of the last four quarters, resulting in an average positive surprise of 374.24%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The utility has been benefiting from the initiatives taken under its Transformation Plan. NRG Energy aims to save more than $1 billion through recurring cost cuts and margin improvements. The initiatives undertaken by NRG Energy through its Transformation Plan will increase annual cost savings from $500 million in 2018 to nearly $590 million in 2020. Margins of the company are likely to expand substantially from $30 million in 2018 to $215 million in 2020.

NRG Energy expects to generate $3.2 billion through asset sales under its Transformation Plan. Monetization of non-core assets and cost-saving initiatives will allow the company to focus more on core assets and strengthen its balance sheet through repayment of exiting debts.

The company also wants to increase shareholders’ value through buybacks. The Board of directors authorized $1 billion share buyback, of which $500 million is scheduled to be repurchased immediately. Post divestiture of additional assets, the company will look forward to utilize another $500 million to buyback shares.

However, a number of NRG Energy's “merchant” facilities function without long-term power sales agreements and are influenced by market price fluctuations. Since there is no guarantee that the power generated from these units will be sold at commercially attractive rates, profitability from the merchant business is uncertain.

A few better-ranked stocks in the same industry worth considering are CenterPoint Energy Inc. CNP, NextEra Energy Inc. NEE and Public Service Enterprise Group Inc. PEG, each carrying a Zacks Rank #2 (Buy).

CenterPoint Energy reported an average positive earnings surprise of 11.50% in the last four quarters. Its 2018 and 2019 earnings estimates moved up 8.4% and 8.6%, respectively, in the last 60 days.

NextEra Energy reported an average positive earnings surprise of 4.75% in the trailing four quarters. Its 2018 and 2019 earnings estimates moved up 6.8% and 7.1%, respectively, over the last 60 days.

Public Service Enterprise reported an average positive earnings surprise of 4.43% in the last four quarters. Its 2018 and 2019 earnings estimates moved up 5.7% and 6.7%, respectively, in the last 60 days.

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CenterPoint Energy, Inc. (CNP): Free Stock Analysis Report
 
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