Why NRG Energy's Shares Plunged 13% in August

By Markets Fool.com

Continue Reading Below

Image source: Getty Images.

What happened

Shares of utility NRG Energy (NYSE: NRG) fell 12.5% in August, according to data provided by S&P Global Market Intelligence, after the company reported a surprising loss in the second quarter.

So what

Sales fell 22.4% in the quarter to $2.6 billion, but net loss exploded to $271 million from $9 million a year ago. That included $198 million in impairments and $80 million of losses on asset sales. Cash from operations did grow from $198 million to $319 million, so cash flows are improving.

Continue Reading Below

What didn't change was NRG Energy's expectation of $3.0 billion to $3.2 billion in adjusted EBITDA for the year and free cash flow, before growth investments, of $1.0 billion to $1.2 billion. The downside is that NRG Energy still has $19 billion of debt, which has made losses very concerning for investors.

Now what

There are rays of hope that NRG Energy can turn its business around, but the second quarter was a reminder that NRG Energy is still in a struggling utility market. A lack of demand growth and low fossil fuel prices have left wholesale power producers like NRG Energy with shrinking margins and losses. Until the utility market improves in a more meaningful way, shares will struggle to recover.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of NRG Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.