low angle view of electric post

NRG Energy Q3 Earnings: Is NYSE:NRG Cheap at 6.5x Forward P/E?

in EARNINGS/INVESTING IDEAS by

NRG Energy, Inc. (NYSE:NRG) is scheduled to report Q3 earnings results on November 5, 2020.

The company is expected to report earnings of $1.93/share on revenue of $3.652 billion. The consensus earnings per share (EPS) of $1.93/share is based on a poll of 2 analysts and represents a decline in eps of −14.0% over the same quarter last year, when the company reported earnings of $2.25/share.

The revenue forecast of $3.652 billion based on a poll of 3 analysts implies a year-over-year (YoY) growth in revenue of 21.9%. Last year the company reported $2.996 billion in revenue for the quarter.

Expected to report EPS contraction of −14.0% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $3,652.17 $2,996.00 21.9%
EPS $1.93 $2.25 −14.0%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 8 tracked quarters, missed 4 quarters, and met expectations 1 quarter.

What are your expectations from NRG Energy, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.16 $1.11 -4.1% Missed
Q1, 2020 $0.83 $0.45 −45.9% Missed
Q4, 2019 $1.09 $0 −99.7% Missed
Q3, 2019 $1.87 $2.25 20.1% Beat
Q2, 2019 $0.84 $0.84 0% Met
Q1, 2019 $0.38 $0.44 14.7% Beat
Q4, 2018 $0.08 $0.04 −47.7% Missed
Q3, 2018 $1 $1.35 34.6% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 2.1%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $33.56 $34.28 2.1% Increase
May 7, 2020 $32.78 $32.77 0.01% Decline
February 27, 2020 $35.05 $33.21 −5.2% Decline
November 7, 2019 $39.58 $38.44 −2.9% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −1.30, the model suggests that the company is likely an earnings manipulator. A value of −1.30 implies a 9.6% chance of earnings manipulation.

Fundamentals And Technical Analysis

NRG Energy, Inc. is currently trading at $31.30/share, down −5.3% for the day. The company is trading at approximately 75.3% of its 52-week high of $41.78/share. The company’s stock price is down −8.7% since the last earnings report and down −3.8% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 53.71 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:NRG Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 1.79 and a forward P/E multiple of 6.53.

NRG Energy, Inc.’s current share price also implies a price-to-book (P/B) multiple of 4.37. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $31.30
P/E Ratio 1.8x
P/E Ratio (Fwd) 6.5x
PEG Ratio 0.0
Total Debt / Total Capital 44.0%
Levered Free Cash Flow $1.443 billion
EV / EBITDA 6.4x

Finbox

NRG Energy, Inc. is a mid-cap stock with a market capitalization of $8.066 billion and a total enterprise value of $13.992 billion. The company operates in the Utilities sector and the Electric Utilities industry.

NRG Energy, Inc., together with its subsidiaries, operates as an energy company in the United States. It operates through Generation and Retail segments. The company is involved in the producing, selling, and delivering electricity and related products and services to 3.7 million residential, industrial, and commercial consumers. It generates electricity using natural gas, coal, oil, solar, nuclear, and battery storage. The company also provides system power, distributed generation, renewable products, backup generation, storage and distributed solar, demand response, energy efficiency, advisory, and on-site energy solutions; and carbon management and specialty services. In addition, it trades in electric power, natural gas, and related commodity and financial products, including forwards, futures, options, and swaps. Further, the company procures fuels; provides transportation services; and directly sells energy, services, and products and services to retail customers under the NRG, Reliant, Green Mountain Energy, Stream, XOOM Energy, and other names. As of December 31, 2019, it owns fossil fuel, nuclear, and renewable plants with generation capacity of 23,000 megawatts. NRG Energy, Inc. was founded in 1989 and is headquartered in Princeton, New Jersey.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.