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Market Price (11/2/2017): $25.97/share; ST-Target: $35/share; NIV: $48/share
- Reported 3Q17 AEPS of $0.78 vs. our $0.74 and consensus of $1.01
- Revised commodity price curve, which resulted in higher NIV but slightly lower estimates
- Raising ST-Target/share to $35 from $30 on strength of rising economy
- NRG has done a great job of realigning its strategy starting with GenOn and moving-on to its B/S management, and now its strategic overhaul. We believe these are all the right moves, and we expect that these will translate into further upside for NRG.
- With new strategy, we’d also expect that NRG can reduce its hedging exposure but NRG has yet to disavow share buybacks
- We’re intrigued and titillated by potential of Boston Energy Trading and Marketing (BETM like “bet ‘em”)
- As expected, it appears NRG will sell 100% of NYLD with rest of its renewable portfolio and believe that NRG would be successful without both
- We look for NRG to aggressively expand its Retail business, especially in the PJM where it has excess generation relative to retail load, which would also allow it to reduce hedging
- We look for continued modest recovery in commodity fundamentals and macro-economic tail wind to pick-up
- We like aggressive debt repay and cost cutting efforts. Successful asset sales would be ST driver.
- ST we expect proceeds to be applied to debt repay, but MT it is likely to be redeployed to acquisitions and other growth projects