Will NRG Energy Beat in 4Q? - Analyst Blog
25 Fevereiro 2013 - 2:45PM
Zacks
NRG Energy Inc. (NRG) is set to report its
fourth-quarter 2012 results on Feb 27. Last quarter, the company
reported a 52.83% negative surprise. Let’s see how things are
shaping up prior to this release.
Factors to Consider This Quarter
We believe the combined negative impact from fuel price volatility,
stringent regulatory compliances and over-reliance on weather
conditions may challenge the near-term results of the company.
Performance of the utility providers primarily depends on weather
patterns of the region. Periods of volatile weather conditions not
only affect demand, but can cause interruptions in coal production
and transportation, especially in harsh conditions. Such situations
increase operating expenses of the utility providers, and NRG
Energy is no exception.
In addition, NRG Energy relies heavily on other parties for the
wholesale transmission of power. Lack of modernization in
transmission infrastructure and transmission price regulations
could restrict the company’s transmission capacity. This will in
turn hamper customer services thus adding to costs.
However, NRG Energy recently completed numerous inorganic and
organic growth projects, including the acquisition of GenOn, and
started operations at the newly installed Alpine Generating Station
along with signing a 20-year electricity sale agreement with
PG&E Corporation (PCG). These projects will
likely help the company to meet the growing demand from California
and Arizona.
Earnings Whispers?
Our proven model does not conclusively show that NRG Energy is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3
for this to happen. This is not the case here as you will see
below.
Zacks ESP: The earnings ESP is 0.0%. This is
because the Most Accurate estimate as well as the Zacks Consensus
Estimate stands at a loss of 29 cents.
Zacks Rank #3 (Hold): NRG Energy with Zacks Rank
#3 (Hold), enhances the possibility of an earnings surprise.
However, the Zacks Rank #3 when combined with a 0.0% ESP makes
surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
NRG Energy is not the only organization looking up this earnings
season. We also expect other utility providers to beat
earnings:
Ormat Technologies Inc. (ORA), earnings ESP of
+50.00% and Zacks Rank #2 (Buy).
Berry Petroleum Company (BRY), earnings ESP of
+4.05% and Zacks Rank #3 (Hold).
BERRY PETROLEUM (BRY): Free Stock Analysis Report
NRG ENERGY INC (NRG): Free Stock Analysis Report
ORMAT TECH INC (ORA): Free Stock Analysis Report
PG&E CORP (PCG): Free Stock Analysis Report
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