NRG is Trading Above 50 Day and 200 Day SMA: Time to Buy the Stock?

NRG Energy Inc. NRG is trading above its 50-day and 200-day simple moving averages ("SMA"), signaling a bullish trend. NRG’s shares have gained steadily over the past 12 months after the earnings beat in three out of the trailing four quarters.

The company benefits from its well-chalked-out investment plan to strengthen its operations, strategic acquisitions, rising demand from a wide customer base and increasing demand for clean energy from the data centers developed in its service regions.

NRG’s 50 and 200 Day SMA

The 50-day and 200-day SMAs are key indicators for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend of the stocks.

NRG Energy has outperformed the Zacks Utility- Electric Power industry, the Zacks Utilities sector and the S&P 500 in the past year.

NRG Stock Outperforms Industry, Sector & S&P 500 (One Year)

Should you consider adding NRG to your portfolio only based on positive price movements? Let’s delve deeper and find out the factors that can help investors decide whether it is a good entry point to add NRG stock to their portfolio.

Factors Acting as a Tailwind for the NRG Stock

NRG Energy has made notable strides in its transformation into an integrated power company by prioritizing customer-centric strategies. Its strong performance has been driven in part by organic growth initiatives. Courtesy of its high-quality services, the company has maintained strong customer retention and a diverse customer base, lowering reliance on any one or two major clients. This diversification enhances the stability and predictability of both customer billing and the company’s earnings. 

NRG Energy is also expanding its operations through strategic acquisitions. The acquisition of Direct Energy and Vivint Smart Home has expanded the company's operations.
 
Contributions from the acquired assets are boosting the performance of NRG Energy. The company’s $550 million cost and growth program is on track to be completed in 2025. The company continues to optimize its generation portfolio by retiring uneconomic fossil fuel plants and monetizing non-core assets. 

NRG Energy is starting to unlock data center and other upside opportunities. NRG has fully dedicated engineering, construction, and offtake structuring teams to execute its tailored data center strategy. NRG increased its order for big gas turbines with GE Vernova Inc. by 1.2 GW to 2.4 GW. These new power plants should support the demand from data centers.

NRG Energy’s Earnings Estimates Moving North

The Zacks Consensus Estimate for NRG’s 2025 and 2026 earnings per share indicates an increase of 0.82% and 1.96%, respectively, in the past 60 days. 

NextEra Energy NEE operates in the same industry. NEE’s 2025 earnings per share indicate an increase of 0.27% in the last 60 days.

NRG Stock’s Earnings Surprise

NRG Energy has been a consistent performer, and the company continues at a high level to meet customer and market needs amid the backdrop of increasing power demand. The company has surpassed expectations in three of the last four reported quarters, missing once, with an average earnings surprise of 27.41%.

Another utility operating in the same industry, Dominion Energy D, also reported positive earnings surprise in three of the last four reported quarters, missing once, resulting in an average surprise of 7.39%.

NRG’s Return on Equity (ROE) Better Than Industry

ROE is an essential financial indicator that evaluates a company’s efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value. The current ROE of the company indicates that it is using shareholders’ funds more efficiently than its peers.

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Dominion Energy currently carries a ROE of 9.51%, which is lower than its industry.

NRG Energy’s Capital Return Program

Utilities are known for their regular dividend payments, and NRG Energy is no exception. NRG’s current quarterly dividend is 44 cents per share, resulting in an annualized dividend of $1.76 per share. The company targets an annual dividend growth rate of 7-9% per share over the long term. NRG has raised its dividend five times in the past five years. More details on NRG’s dividend are available here.

NextEra Energy plans to increase the dividend rate annually by 10%, at least through 2026, from the 2024 base, subject to its board’s approval. The current annual dividend NEE is $2.27 per share.

NRG Energy’s Shares Trading at a Premium

The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis. NRG Energy is currently trading at 19.68X compared with the industry average of 15.2X.

Wrapping Up

NRG Energy continues its stable performance, backed by rising demand for clean energy from the data centers in its service territories. The company continues to expand through organic and inorganic initiatives.

Given the improvement in earnings estimates and return on equity, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility. Since NRG is trading at a premium, it is better to wait for a while and look for a better entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research