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On Wednesday, BMO Capital Markets adjusted its outlook on NRG Energy (NYSE:NRG), raising the price target to $167 from the previous $115, while retaining a Market Perform rating on the shares. The revision follows NRG Energy’s announcement of its acquisition of a significant virtual power plant (VPP) portfolio, which BMO Capital views as a positive step for the company. The stock, currently trading at $158.19, has demonstrated remarkable momentum with a 75% gain year-to-date, according to InvestingPro data.
NRG Energy recently announced the purchase of a 12.9GW/6GW commercial and industrial (C&I) VPP portfolio from LS Power, a privately-held company. The deal, valued at $12.9 billion, includes a combination of cash, stock, and assumed debt. BMO Capital’s analyst highlighted the accretive nature of the acquisition to NRG’s earnings per share (EPS) and free cash flow before growth (FCFbG), as well as the company’s ongoing commitment to shareholder returns even as it works through the deleveraging process.
The acquisition is expected to enhance NRG’s business profile and provide clear benefits to its EPS and FCFbG, according to the analyst’s report. In light of the acquisition, BMO Capital has increased its EPS estimates for NRG Energy for the years 2025 through 2030. The new estimates reflect an average increase of 20% to the EPS forecasts, with figures adjusted to $7.29, $9.15, $10.42, $11.30, $11.96, and $12.69 for each respective year from 2025 to 2030.
The raised price target of $167 per share is based on BMO Capital’s updated 2027 EPS and FCFbG per share estimates. This reflects the firm’s expectation of NRG’s future financial performance following the strategic acquisition. The Market Perform rating suggests that BMO Capital anticipates the stock will perform in line with the broader market.
In other recent news, NRG Energy has reported a strong financial performance for the first quarter of 2025, surpassing analyst expectations. The company achieved an adjusted earnings per share (EPS) of $2.68, significantly higher than the projected $1.67, and reported revenue of $8.59 billion, exceeding the forecasted $7.61 billion. This financial success is complemented by NRG Energy’s strategic move to acquire a portfolio from LS Power Equity Advisors for approximately $12.1 billion. The acquisition includes assets such as Lightning Power LLC and CPower Energy Ltd., which will expand NRG’s generation capacity and geographic reach.
S&P Global Ratings has revised NRG Energy’s outlook to stable from positive following this acquisition, which is expected to enhance the company’s generation capabilities in key regions like Texas, Pennsylvania, and New York. The deal is anticipated to increase NRG’s owned generation to 24.3 gigawatts from 11.4 gigawatts, improving its ability to meet retail demand and diversify its energy portfolio. Additionally, NRG plans to finance the purchase through a combination of debt and equity, including issuing $2.8 billion of equity to LS Power.
The acquisition has led to a reaffirmation of NRG’s ’BB’ issuer credit rating by S&P Global Ratings, with expectations of improved leverage ratios by 2026. The company has also reaffirmed its full-year 2025 guidance, projecting robust performance driven by strategic acquisitions and market expansion efforts. This acquisition marks a shift in NRG’s strategy, emphasizing the company’s commitment to strengthening its competitive position in the energy market.
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