This Just In: Analysts Are Boosting Their NRG Energy, Inc. (NYSE:NRG) Outlook for This Year

By
Simply Wall St
Published
May 11, 2022
NYSE:NRG
Source: Shutterstock

NRG Energy, Inc. (NYSE:NRG) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. The market may be pricing in some blue sky too, with the share price gaining 12% to US$41.69 in the last 7 days. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

Following the latest upgrade, the six analysts covering NRG Energy provided consensus estimates of US$24b revenue in 2022, which would reflect an uneasy 11% decline on its sales over the past 12 months. Statutory earnings per share are supposed to crater 72% to US$4.73 in the same period. Prior to this 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.

View our latest analysis for NRG Energy

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NYSE:NRG Earnings and Revenue Growth May 11th 2022

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. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. 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. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the NRG Energy's past performance and to peers in the same 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. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.6% annually for the foreseeable future. It's pretty clear that NRG Energy's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues 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.

Analysts are definitely bullish on NRG Energy, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 1 other warning sign we've identified .

You can also see our analysis of NRG Energy's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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