NEW YORK (TheStreet) -- David Crane is the Elon Musk of electricity.
The CEO of NRG Energy (NRG - Get Report), built from the detritus of a 2003 bankruptcy, is rapidly becoming the public face of a utility industry revolution, the company logo plastered on the Houston Texans' stadium, partnerships with people like Dean Kamen and Richard Branson in place, and behind it profits from resurrecting coal.
Crane is primarily a financial engineer. His business is selling electricity for more than it costs him to make it, preferably on long-term contracts, and right now his approach seems to be working.
Since mid-2012 NRG has been on the rise, its shares more than doubling in priceafter it launched a dividend which began at 9 cents per share and has since nearly doubled to 14 cents. Despite pulling back from recent highs options buyers are making bullish bets on the company. Shares are currently at $31, up 8% for the year to date.
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NRG is due to report earnings for its June quarter later this week with analysts, most of whom have it rated as a buy, expecting earnings of 18 cents per share, and $1.66 per share for the full year.
Analysts like the way Crane has spun-out NRG's best-performing assets as NRG Yield (NYLD). Those shares have risen 83% since their launch a year ago and NRG Yield, which operates like a real estate investment trust, is currently selling new shares to buy a California wind farm.
It is a style meant to generate headlines. Typical is a recent appearance at a clean energy meeting in Chicago, where Crane criticized the public policy stances of local utility Exelon (EXC) after closing on a deal to buy four coal-powered power plants out of bankruptcy.
Despite all of Crane's green rhetoric one of NRG's biggest investments to date is a $1 billion bet on coal. NRG is using Japanese technology to capture 90% of the carbon from a power plant in Texas, with the aim of selling the resulting carbon dioxide gas for use in fracking.
You might not know about NRG's coal platform because Crane is far more likely to talk about his company's $35 million investment in FuelCell Energy (FCEL), its acquisition of a solar plant in the Virgin Islands, its work with microgrids on Branson's Necker Island or the Kamen-designed Stirling engine providing backup power to his home in New Jersey.
He's not just being green. What Crane is betting on is a more decentralized power system where the company whose wire comes into your home is less important than the one which actually creates your power, which could be done directly or through an equipment lease.
It's a brash style that will work for Crane as long as it works for investors, and right now it's doing just that.
At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates NRG ENERGY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate NRG ENERGY INC (NRG) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NRG's very impressive revenue growth greatly exceeded the industry average of 23.5%. Since the same quarter one year prior, revenues leaped by 67.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- NRG ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NRG ENERGY INC swung to a loss, reporting -$1.24 versus $2.21 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus -$1.24).
- Currently the debt-to-equity ratio of 1.79 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, NRG's quick ratio is somewhat strong at 1.10, demonstrating the ability to handle short-term liquidity needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, NRG ENERGY INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: NRG Ratings Report