NRG’s Changes Likely Won’t Placate Activist Investor Elliott
NRG Energy NRG –0.66% announced a raft of changes at its investor day Thursday, but activist investor Elliott Management probably won’t be placated.
The Houston-based utility increased its buyback program to $2.7 billion from $1 billion, planning to return 80% of excess cash to investors. NRG (ticker: NRG) also identified $150 million in cost reductions, and said it was working with a search firm to bolster the board of directors.
Those moves sent NRG stock up 3% in Thursday’s trading. BofA Securities analysts said the company’s updates to shareholders were “exceeding the goal post,” and reiterated a Buy rating on shares.
Similarly, John Buethe, a portfolio manager for Maven Investment Partners, called NRG, “one of the most exciting growth areas in cleantech,” in light of its updates and acquisition of Vivint Smart Home in March. It’s strategy, he added, is “potentially transformative.”
But not all on Wall Street are so impressed with NRG’s update—a lack of consensus that likely means Elliott won’t back down. Elliott didn’t comment on NRG.
Notably, NRG’s projected cost cuts of $150 million fall short of Elliott’s target of $500 million. Also, analysts at Wolfe Research say NRG’s presentation lacked details, which “makes it harder to buy into a five-year outlook, especially after hiccups in recent years.”
The Wall Street Journal reported in the past week that the hedge fund is looking to oust NRG CEO Mauricio Gutierrez and other members of management. Barron’s confirmed the report with sources familiar with the situation.