NRG Energy Exceeds Street Expectations: Analyst Dives Into Its Cumulative Cash Flow And Debt Reduction Targets

BofA Securities analyst Julien Dumoulin-Smith believes NRG Energy Inc NRG analyst day key pointers exceed Street expectations and reiterated a Buy rating on the stock with the price objective of $42.

The analyst sees the company's cumulative cash flow target of around $10.5 billion ($8.3 billion shareholder return and $2.5 billion in debt reduction) exceeding their cumulative estimates of $9.7 billion for FY23-FY27 + net cost savings of $425 million.

The analyst believes the 17% of the FCF (through five years) to be entirely driven by the recent acquisition of Vivint Smart Home Inc, implying around 18% annualized FCF yield on the Vivint acquisition. 

Related: NRG Energy Bolsters Retail Platform Via $5.2B Vivint Smart Home Deal - What's On The Cards?

The analyst expects half of the growth capital ($700 million) to be used for three new gas plants in Texas. 

The analyst believes 5-year targets of cumulative shareholder returns of $6.9 billion assume increasing share price. 

Smith estimates EPS of $8.61 for 2023, $7.34 for 2024, and $5.47 for 2025.

Also Read: Activist Investor Pressures NRG Energy To Change CEO: Report

Price Action: NRG shares are trading higher by 3.53% at $35.08 on the last check Thursday.