We recently updated a research report on NextEra Energy NEE. Its well-chalked out capital investment plan, natural gas pipeline projects, addition of renewable generation assets and strategic acquisitions are going to drive its performance over the long run.
In the last four reported quarters, the company registered an average positive earnings surprise of 2.4%. It has reiterated its long-term earnings growth guidance. The company’s earnings are expected to grow at a compound annual rate of 6-8% per year through 2021, off its base of $7.70 in 2018.
Factors Acting as Tailwind
NextEra Energy has well-chalked plans to invest in the range of $50-$55 billion in different projects, which are extended from the last year through 2022. These investments will be directed to modernize and strengthen the company’s existing infrastructure, thereby enabling it to serve the expanding customer base more effectively.
NextEra Energy also invests in natural gas pipeline operations. The acquisition of Gulf Power Company, Florida City Gas and ownership stakes in two natural gas power plants from Southern Company will further expand regulated natural gas operation and be accretive to its earnings over the long term.
The company has plans to generate more energy from clean sources and systematic investments are helping it to do the same. The investments are also aiding NextEra Energy to lower carbon emissions from the production process. These initiatives will help the company achieve the plan of reducing carbon dioxide emissions rate to 67% by 2025 from a 2005 base. In addition, utilities like Duke Energy Corporation DUK, Xcel Energy XEL and Dominion Energy D are investing considerably to lower carbon emissions, and add more renewable and clean sources to their generation portfolio.
Headwinds
NextEra Energy’s nature of business is subject to complex and comprehensive federal, state and other regulations. The company’s regulated entity, FPL, depends on the Florida Public Service Commission for timely rate relief and cost recovery approvals. Any denial of such applications could materially affect its operational results.
Unfavorable supply costs necessary to provide energy could have an undesirable impact on NextEra’s earnings outcome. Increasing indirect input costs are also a headwind for the company.
Zacks Rank and Price Performance
NextEra Energy currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its shares have outperformed the industry in the past 12 months.
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