NextEra Energy Partners, LP NEP recently announced a reduction in its cash distribution per-unit growth rate to 5-8% per year through at least 2026, with a target growth rate of 6%. The new guidance is down nearly 50% from the previously guided range of 12-15% annually through 2026. This decline in cash distribution rate did not go well with the market and as a consequence, the units of the firm dropped by 20.1% from Sep 26, 2023, to close at $37.46 per unit.
NextEra Energy Partners decided to reduce distribution rates to counter the adverse impact of tighter monetary policy and higher interest rates. The reduction in distribution rates will certainly increase the firm’s financial flexibility and it does not expect to issue equity to meet its revised growth expectations until 2027.
Trimming Outlook
Consistent with the reduction of its distribution growth-rate expectations, NextEra Energy Partners is revising its year-end run-rate expectations for adjusted EBITDA and CAFD.
NextEra Energy Partners now expects adjusted EBITDA and CAFD for 2023 to be in the ranges of $1,900-$2,100 million and $730-$820 million, respectively, down from the previous range of $2,200-$2,420 million and $770-$860 million, respectively.
Long-Term Plans
The company will focus on higher-yielding growth opportunities, such as organic repowering in the short to medium term and reduce new capital requirements. The firm also expects to continue to look to acquire wind, solar and storage assets from NextEra Energy Resources and other third parties at favorable yields.
NextEra Energy Resources' strong portfolio of renewables projects, which are expected to total 58 gigawatts through 2026, together with organic growth and third-party acquisitions, will continue to provide NextEra Energy Partners with excellent growth opportunities.
Price Performance
The units of NextEra Energy Partners lost 33.8% in the last three months, wider than the industry’s decline of 2.7%.
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Zacks Rank and Other Stocks to Consider
NextEra Energy Partners currently sports a Zacks Rank #1 (Strong Buy).
Other top-ranked stocks in the same industry worth considering are Constellation Energy Corporation CEG, FREYR Battery FREY and Texas Pacific Land TPL. Constellation Energy sports a Zacks Rank #1 and FREY and TPL each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CEG’s long-term (three- to five-year) earnings growth rate is 23.3%. The Zacks Consensus Estimate for 2023 EPS of $5.47 indicates an increase of 24.6% in the last 60 days.
FREYR Battery reported an average earnings surprise of 25.8% in the trailing four quarters. The Zacks Consensus Estimate for 2023 reflected an improvement of 3% in the last 60 days.
Texas Pacific Land reported an average earnings surprise of 1.3% in the trailing four quarters. The Zacks Consensus Estimate for 2023 reflected an improvement of 6.4% in the last 60 days.
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