We reiterate our Neutral recommendation on NextEra Energy Inc. (NEE). The electric utility company presently carries a Zacks Rank #3 (Hold).
Why the Reiteration?
NextEra Energy reported mixed financial results for the fourth quarter and full year 2012 with earnings beating the Zacks Consensus Estimate while the top line falling short. This was attributable to positive rate changes, effective execution of growth programs and continued customer expansion partially tempered by lower prices and an unfavorable contribution from the Energy business.
We believe NextEra’s prospects look encouraging in the near term on the back of a positive housing construction market in Florida. The company is also focusing to develop its midstream businesses and will derive significant benefits from the Lone Star Transmission project expected to be operational in 2013.
Furthermore, the company has several renewable initiatives like the Genesis Program, Desert Sunlight and Spain Solar lined up for 2013 and 2014. With clean energy likely to dominate the energy generation portfolio in the future owing to the U.S. government’s strict pro-environment stance, we anticipate these projects will boost NextEra’s future growth.
However, the company’s recent plan for massive modernization of its power infrastructure in Florida might lead to cost pressure, going forward. Moreover, volatility in commodity prices could pose challenges to growth.
Other Stocks to Consider
Other stocks in the utility domain that are presently doing well include Pike Electric Corporation (PIKE), Otter Tail Corporation (OTTR) and Brookfield Infrastructures Partners L.P. (BIP). All these stocks carry a Zacks Rank #1 (Strong Buy).
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