Here’s a fact that most people probably don’t know. NextEra Energy (NYSE:NEE) is now the biggest provider of wind and solar energy in the world. Not only that, but it’s currently more valuable than energy giant Exxon Mobil (NYSE:XOM). These facts bode well for holders of NextEra Energy stock.
NextEra is also the world’s most valuable utility company, and we can attribute this, to a large extent, to the company’s forward-looking vision. And judging by the price action of NextEra Energy stock, the company’s clean-energy strategy has been wholeheartedly endorsed by the investing community.
On the other hand, we should look closely at both the company’s fundamentals and its technicals. And when we examine the price action of NextEra Energy stock, we might make some value-oriented investors uncomfortable.
Thus, we’ll need to weigh the lofty share price versus the shareholder value that NextEra Energy offers.
A Closer Look at NextEra Energy Stock
As I alluded to earlier, NextEra Energy stock isn’t exactly what a value investor would consider bargain priced. The stock’s trailing 12-month price-to-earnings ratio of 42.22 isn’t particularly competitive compared to NextEra’s peers.
The 52-week range of $174.80 to $306.87, and the fact that NextEra Energy stock is trading almost exactly at the top of that range, also indicates that the shares are pricey at the moment.
However, income-focused investors won’t mind the fact that NextEra Energy stock offers a forward annual dividend yield of 1.85%. So, we can put that in NextEra’s favor.
Still, at the end of the day, we can’t really call NextEra Energy stock a value investor’s dream. Rather, prospective shareholders should view this stock as a strong runner based on the company’s firm financials and clear vision of the energy market’s future.
Finally, it’s important to note that NextEra’s board recently approved an upcoming four-for-one forward stock share split. As the company reports, “Each shareholder of record on Oct. 19, 2020, will receive three additional shares of common stock for each then-held share, to be distributed on Oct. 26, 2020.” So, be ready for that event.
NextEra Energy didn’t get to be the most valuable utility firm without powerful, consistent growth. As evidence of this, the company has adjusted its forward guidance and the numbers are highly encouraging.
For 2020, NextEra expects its adjusted earnings per share to fall within a range of $2.18 to $2.30. Moreover, things should get even better in 2021. Indeed, NextEra forecasts adjusted earnings per share within the range of $2.40 to $2.54 for next year.
And it only gets better in 2022 and 2023 with NextEra Energy expecting to grow by 6% to 8% during that time frame. Thus, in terms of earnings per share, NextEra expects $2.55 to $2.75 in 2022 followed by $2.77 to $2.97 in 2023. These numbers clearly paint a portrait of a company in consistent fiscal growth mode.
The Next Era for NextEra
NextEra readily admits that its ambitious forward guidance reflects “the ongoing strength of the renewables development environment.” That’s not a bad thing at all as a shift toward a clean-energy business model is both commendable and savvy.
Jigar Shah, co-founder of Generate, observes a palpable shift happening in the energy market. “People believe that renewable energy is a growth story and that oil and gas is a declining story,” Shah asserts.
This can, at least in part, explain why NextEra Energy overtook Exxon Mobil in value. If Exxon Mobil is an energy market dinosaur, NextEra represents (as the name suggests) the next era of cleaner, greener energy sources.
Just to provide a concrete example of this, NextEra Energy recently announced its plan “to build nearly 700 MWs of fully-contracted battery storage projects in California before the end of 2022.”
This will entail a capital investment of nearly $800 million, but I believe it will be well worth the price of admission. The planned battery storage projects, which will be co-located at six of the company’s already existing solar projects, represent a firm commitment to a more carbon-free, sustainable future for the energy industry.
The Bottom Line
Should we claim that NextEra Energy stock is cheap? The technicals would suggest that it’s not cheap at all. Yet, this doesn’t mean that you shouldn’t own the stock.
Prospective investors shouldn’t just focus on the price of NextEra Energy stock. There’s more to the story as the company expects to grow consistently. Plus, NextEra is preparing today for a more sustainable energy market tomorrow.
Therefore, it doesn’t really make sense to obsess over the price of NextEra Energy stock. Instead, consider the value you’re getting. And given the company’s powerful vision for the future, the stock’s value is undeniable.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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