It has been about a month since the last earnings report for NextEra Energy Partners (NEP). Shares have lost about 17.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is NextEra Energy Partners due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
NextEra Energy Partners' Q2 Earnings & Sales Miss Estimates
NextEra Energy Partners, LP recorded second-quarter 2023 operating earnings of 53 cents per unit, which missed the Zacks Consensus Estimate of 72 cents by 26.4%. The bottom line also declined 79.7% from $2.61 recorded in the year-ago quarter.
The firm’s operating revenues of $350 million in the reported quarter missed the Zacks Consensus Estimate of $393 million by 10.9%. The figure also declined 3.3% from $362 million registered in the prior-year period.
Renewable energy reported sales of $293 million, down 3% year over year. The Zacks Consensus Estimate for the same was pegged at $334.2 million.
Texas pipelines service revenues totaled $57 million, down 5% from the year-ago quarter’s figure. The Zacks Consensus Estimate for the same was pinned at $57.1 million.
Highlights of the Release
NextEra Energy Partners’ total operating expenses amounted to $286 million, up 11.7% from the year-ago quarter’s $256 million. This was due to a 28.6% increase in depreciation and amortization.
Our model projected total operating expenses at $292.1 million for the second quarter.
Operating and maintenance expenses totaled $131 million, down 3.7% from the prior-year quarter’s recorded figure of $136 million.
The firm reported an operating income of $64 million, down 51.9% from $133 million in the corresponding period of 2022.
In the second quarter, NextEra Energy Partners shared plans to sell natural gas pipeline assets to become the top pure-play investment opportunity in 100% renewable energy.
The company had cash and cash equivalents of $587 million as of Jun 30, 2023, compared with $235 million as of Dec 31, 2022.
Long-term debt was $5,918 million as of Jun 30, 2023, compared with $5,250 million as of Dec 31, 2022.
Net cash provided by operating activities in the first six months of 2023 totaled $296 million compared with $409 million in the year-ago period.
NEP declared a quarterly distribution of 85.4 cents per common unit to an annualized rate of $3.42 per common unit to its unit holders. With the declaration, the annual distribution per common unit has increased approximately 12% from that recorded in the second quarter of 2022. It will be payable on Aug 14, 2023, to unit holders of record as of Aug 4, 2023.
NextEra Energy Partners continues to expect run-rate for adjusted EBITDA of $2.22-$2.42 billion and CAFD of $770-$860 million as of Dec 31, 2023.
The firm continues its projection of 12-15% growth per year in limited partner distributions per unit, a reasonable range of expectation through at least 2026. It anticipates the annualized rate of fourth-quarter 2023 distribution to be in the range of $3.64-$3.74 per common unit, payable February 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
Currently, NextEra Energy Partners has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, NextEra Energy Partners has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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