Vistra Gains 13.6% Since Q3 Earnings: How Should You Play the Stock?

Vistra Corp. VST reported strong third-quarter 2024 results. Since the announcement on Nov. 7, shares of the company have rallied 13.6% to $154.14, reflecting investor optimism about its improved outlook for 2024.

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Vistra posted a strong third-quarter earnings per share of $5.25, which surpassed the Zacks Consensus Estimate of $1.24 by a whopping 323.4%. Amid milder Texas weather, the strong contribution from its retail and generation assets allowed the company to come out with strong earnings results.

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Improving share price post-earnings release surely can’t be the only reason for adding Vistra in your portfolio. Let’s delve deep and find out factors that can assist investors in deciding whether it is a good entry point or one needs to wait longer for a better entry point.

Factors Acting as Tailwind for Vistra

Vistra enjoys the benefit of increasing demand for clean electricity in its service region. The development of large load data centers and electrification of oil field operations, primarily in the Permian Basin, continue boosting demand for its services. Rising demand from semiconductor and industrial customers in VST’s service region is improving demand. The company also gained from the addition of new residential customers in its service area.

Google has been investing in its data centers in Texas, and the management of Google’s parent company, Alphabet GOOGL, is also contemplating powering its data centers by sourcing electricity produced from nuclear power plants, which can create new opportunities for Vistra.

As of Sept. 30, 2024, Vistra has hedged 100% of its expected generation volumes for the rest of 2024, around 96% for 2025, and about 64% for 2026. The company's comprehensive hedging program and recent forward price curves support its 2024 guidance range.

Vistra has more than 70 sites with land and interconnects for the future development of clean energy projects. The company also received approval from the Nuclear Regulatory Commission to operate its Comanche Peak nuclear plant for an additional 20 years.

Vistra Raises Value of its Shareholders

Vistra continues to increase its shareholders' value through its share repurchase program and dividend payments.

The company expects to execute at least $3.25 billion of share repurchases for 2024-2026. Vistra has bought back shares worth more than $4.25 billion from November 2021, resulting in a 29% reduction in outstanding shares from November 2021 levels.

VST’s board of directors has also approved a quarterly dividend of 22.15 cents for the fourth quarter of 2024, reflecting a sequential increase of 1%. Check VST’s dividend history here.

VST’s Earnings Estimates Move Up

The Zacks Consensus Estimates for Vistra’s 2024 and 2025 earnings per share imply growth of 5.53% and 7.33%, respectively, in the last 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.

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VST’s ROE Higher Than Its Industry

VST’s trailing 12-month return on equity (ROE) is 57.63%, ahead of the industry average of 10.98%. ROE, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds in its operations to generate income.

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Vistra Stock Trading at a Premium

Vistra is currently trading at a premium valuation compared to its industry, with its forward 12-month price-to-earnings (P/E) ratio at 25.54X. The industry is currently trading at 16.6X.

Vistra is currently trading at a premium compared with another operator in the industry, Duke Energy Corporation DUK, which has a strong nuclear fleet. The current P/E- F12M ratio of DUK is 18.24X.

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Summing Up

Vistra’s earnings per share estimates have increased over the last 60-day period, and the company surpassed estimates in the last reported quarter. The company enjoys the benefit of rising demand for clean electricity in its service territory.

Vistra's comprehensive hedging program and more than 70 sites with land and interconnects for the future development of clean energy projects will allow it to move toward more clean electricity generation.

The stock is currently trading at a premium, so it is better to remain invested in this Zacks Rank #3 (Hold) stock, and enjoy the benefits of dividends and look for a better entry point later.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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