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Why NRG Energy Stock Tanked 15% in Morning Trading Today

What happened

Shares of U.S. utility NRG Energy (NYSE: NRG) fell as much as 15% in early trading on March 17. There was little question about what led to the decline: It was a 6 a.m. EDT news release outlining the financial impact of winter storm Uri.

So what

NRG Energy has notable operations in Texas, which was hit hard by Uri. It knocked out power across vast swatches of the state, resulted in wild gyrations in local power markets, and caused massive disruption in the energy sector. It is not surprising that NRG was hurt. That said, earlier in the month, NRG Energy suggested that the impact wouldn't be material enough to alter its outlook. That clearly hasn't played out as expected.

Image source: Getty Images.

There are a lot of moving parts here, but the really big takeaways from the update are pretty simple to understand. According to the release, "Storm Uri expected to have a more significant impact on the Company's 2021 results." Therefore, NRG Energy is withdrawing its guidance because it can't predict where things go from here, including on the legislative front. That said, management noted that, with what is known today, a $750 million loss seems possible, though that could change based on other developments. Meanwhile, the utility highlighted its financial condition and noted that its efforts to reach investment-grade credit metrics might be delayed until at least 2022. Unsurprisingly, investors took a dim view of the update and sold the stock.

Now what

Uncertainty is fairly high right now with regard to Uri and the ultimate impact it will have on NRG Energy. Conservative investors looking for a utility stock would probably be better off examining other options until there is more clarity.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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