The main European stock markets were up more than 1% today, with energy and mining stocks leading the advance. On Wall Street, the three indexes were in the green as well. Among the gaining securities today was NRG Energy Inc. (NRG, Financial).
NRG Energy was up almost 28% in Wednesday´s trading after the company confirmed a new transformation plan, which consists of cutting more than $1 billion in recurring costs. It also plans to reduce debt by $13 billion over a three-year period, deleveraging the balance sheet.
The transformation plan also targets about $1.065 billion in recurring costs and margin improvements, including $855 million in recurring annual free cash flow before growth accretive improvements and $210 million in permanent SG&A reduction from asset sales and divestments.
The plan focuses on earnings growth and cost reductions, while creating value for shareholders.The plan was approved unanimously.
Mauricio Gutierrez, NRG's president and CEO, said the plan is a "commitment to simplify and strengthen the company" so it can thrive in any market cycle.Ă‚
"This plan is the result of a comprehensive review of our entire business by the board and management to simplify our business, right-size our portfolio and strengthen our balance sheet to create significant value for all our stakeholders,” Gutierrez said.
But this is not new; NRG Energy began constructing the plan in February, a month after activist hedge fund manager Paul Singer (Trades, Portfolio) said the stock was “deeply undervalued.”
The company's first-quarter earnings per share of -52 cents missed the market consensus by 11 cents. Revenue of $2.76 billion missed by $530 million, registering a 14.6% year-over-year decline.
Singer's Elliott Management, which holds about a 6% stake in the company, has benefited from this upside movement. Singer boosted his position by 313% in the first quarter to 18.07 million shares. Further, Jim Simons (Trades, Portfolio) also bet big in the first quarter, upping his stake by 339% to 1.27 million shares.
Disclosure: The author holds no position in any stocks mentioned.
