$NRG $VST NRG Energy (NRG +4.6%) is initiated with

$NRG $VST NRG Energy (NRG +4.6%) is initiated with a Buy rating and a $33 price target at UBS, which believes the stock will climb as announced asset sales close and plans for return of capital are revealed at the company's March 27 analyst day.

NRG has indicated it will seek projects averaging 13.75% unlevered pre-tax returns or return capital to shareholders, and UBS thinks the market would prefer share buybacks and is the message NRG likely will deliver, given the high bar set for investment returns.

UBS says incremental deleveraging likely is unnecessary, with pro forma net debt-to-EBITDA at 2.8x at year-end 2018 and an ongoing free cash flow yield of 13%; the firm also expects an update on progress toward cost-cuts and margin enhancements goals at the analyst day meeting.

UBS also initiates Vistra Energy (VST +1.7%) but with a Neutral rating and $21 target, seeing shares as fairly valued even with closing of the Dynegy deal, as the company is more exposed longer term to volatility in the power markets.

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