Celebrations may be in order for NRG Energy, Inc. (NYSE:NRG) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Investors have been pretty optimistic on NRG Energy too, with the stock up 12% to US$41.69 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
After the upgrade, the consensus from NRG Energy's six analysts is for revenues of US$24b in 2022, which would reflect an uneasy 11% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to nosedive 72% to US$4.73 in the same period. Before this latest update, the analysts had been forecasting revenues of US$19b and earnings per share (EPS) of US$3.62 in 2022. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$44.00, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on NRG Energy, with the most bullish analyst valuing it at US$52.00 and the most bearish at US$36.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 14% by the end of 2022. This indicates a significant reduction from annual growth of 22% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.6% per year. It's pretty clear that NRG Energy's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at NRG Energy.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential risk with NRG Energy, including a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 1 other risk we've identified .
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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