Why Dynegy (DYN) Stock is Soaring Today

NEW YORK (TheStreet) -- Shares of Dynegy Inc. (DYN) are soaring 17.50% to $34.92 in early morning trade after the power producer announced two separate deals for coal and natural gas generation assets worth a total of $6.25 billion, the New York Times reports.

The company is buying ownership interests in power plants in the Midwest from Duke Energy (DUK)  and its retail business for $2.8 billion.

Dynegy is also buying ownership interests in plants in New England, Pennsylvania and the Midwest from private equity firm Energy Capital Partners for $3.45 billion.

 

The two transactions will add 12,500 megawatts of generating capacity, giving Dynegy nearly 26,000 megawatts of generating capacity nationally. Dynegy will also enter three new retail markets: Ohio, Pennsylvania and Michigan, the Times said.

Houston-based Dynegy plans to issue $5 billion in new unsecured bonds and $1.25 billion in equity and equity-linked securities to help finance the transactions.

The two deals are expected to close by the end of the first quarter 2015.

TheStreet Ratings team rates DYNEGY INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate DYNEGY INC (DYN) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for DYNEGY INC is currently extremely low, coming in at 3.84%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, DYN's net profit margin of -23.60% significantly underperformed when compared to the industry average.
  • DYNEGY INC has improved earnings per share by 18.0% 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, DYNEGY INC swung to a loss, reporting -$3.59 versus $7.89 in the prior year. This year, the market expects an improvement in earnings ($0.22 versus -$3.59).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Independent Power Producers & Energy Traders industry average. The net income increased by 15.2% when compared to the same quarter one year prior, going from -$145.00 million to -$123.00 million.
  • Investors have driven up the company's shares by 43.17% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the future course of this stock, we feel that the risks involved in investing in DYN do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • DYN's very impressive revenue growth greatly exceeded the industry average of 14.0%. Since the same quarter one year prior, revenues leaped by 73.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • You can view the full analysis from the report here: DYN Ratings Report
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