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NRG Energy Posts Strong 1Q16 Results: Stock Rises to 8-Month High

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NRG Energy’s strong performance in fiscal 1Q16

NRG Energy (NRG) rose to a nearly eight-month high after posting strong fiscal 1Q16 results on May 5, 2016. It beat analysts’ earnings as well as revenue estimates for the quarter. NRG Energy’s strategic developments and corporate restructuring are still underway and are turning out to be a much-needed change for the company.

After the earnings announcement, NRG president and chief executive officer Mauricio Gutierrez said, “NRG’s strong financial and operational performance continued despite a weak weather and commodity market environment, validating our integrated competitive power platform.”

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NRG: Factors that impacted revenues

During fiscal 1Q16, NRG reported revenues of $3.2 billion against $3.8 billion in fiscal 1Q15. This was a fall of more than 15% in revenues year-over-year. NRG Energy’s principal Generation business experienced milder weather during the quarter, which negatively affected revenues. Heating degree days, particularly in the Eastern region, were 24% less than 1Q15.

NRG also witnessed lower capacity revenues and a decline in dark spreads in the Eastern region. Dark spread is the difference between the cost of coal to produce a certain amount of electricity and the price a generator receives for that electricity. NRG’s Generation segment received higher capacity revenues in the Gulf Coast region.

NRG’s strategic developments

NRG Energy formally announced that it has completed the integration process of its residential solar business to NRG. NRG is also in the process of selling EVgo, its electric vehicle charging business, to Vision Ridge Partners for $50 million.

NRG Energy is the biggest merchant power player in the United States (SPY). Its peers include Dynegy (DYN) and Calpine (CPN). Merchant power players (XLU) are struggling these days due to volatile power prices in wholesale markets. Dynegy reported better revenues and earnings for the quarter compared to 1Q15. But Calpine reported a fall in revenues as well as earnings in 1Q16.

Next, let’s see why NRG Energy beat earnings estimates in fiscal 1Q16.

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