NRG Energy, the Houston-based utility company, revealed several changes at its recent investor day that left Wall Street divided. The company increased its buyback program to $2.7 billion, earmarking 80% of excess cash for investors. It also identified $150 million in cost reductions and was reportedly working with a search firm to add more members to its board of directors.
As a result of these developments, NRG’s stock rose by 3% during Thursday’s trading session. BofA Securities analysts praised the company’s efforts, stating that NRG exceeded their expectations and reiterated a Buy rating on the stock.
Similarly, John Buethe, a portfolio manager for Maven Investment Partners, called NRG “one of the most exciting growth areas in cleantech.” He mentioned the acquisition of Vivint Smart Home in March and stated that NRG’s strategy is “potentially transformative.”
However, not everyone is convinced by NRG’s plans. Elliott Management, an activist investor in the company, has been critical of NRG’s decisions, stating that the projected $150 million in cost cuts fall short of its target of $500 million. Moreover, analysts at Wolfe Research claim that NRG’s presentation lacked details, making it difficult to believe in the company’s five-year outlook after previous setbacks.
The Wall Street Journal reported last week that Elliott Management is looking to oust NRG CEO Mauricio Gutierrez and other members of management. Despite the criticism, NRG Energy appears committed to moving forward with its plan to return excess cash to investors and cut costs.
