On Nov 15, 2017, we issued an updated research report on NextEra Energy, Inc. NEE.
The company is benefiting from its focus on clean energy. NextEra Energy has lowered emission levels and is trying to reduce energy bills for customers. However, impacts of unpredictable natural disasters remain a headwind. Notably, its $3-billion infrastructure investment in the last 11 years in Florida has cushioned it against significant electric infrastructure losses.
NextEra Energy’s third-quarter 2017 adjusted earnings surpassed estimates by 5.7% on the back of solid contribution and investments from its segments — Florida Power & Light Company (FPL) and NextEra Energy Resources (NER).
NextEra Energy is on track with its business strategies. The company makes long-term investments in clean energy assets with plans to put in $40-$44 billion in projects during 2017-2020. In line with this strategy, the company announced plans to generate an additional 1,400-3,800 megawatt (MW) of solar generation in the United States over the next few years.
NextEra Energy's current renewal energy development program aims at bringing 10,100-16,500 MW of new renewable projects online (including wind repowering) during 2017-2020.
In the last two years, FPL has entered into agreements to shut two independent coal-fired power plants, with the aim of saving additional costs for customers. This is expected to result in $183 million in savings for FPL customers and reduce annual carbon dioxide emissions by 5.6 million tons.
However, the company's business is subject to complex federal, state and other regulations. Additionally, its subsidiaries depend on regulatory bodies for rate relief and cost recovery approvals. As a result, NextEra Energy’s current capital projects might get hampered by delays. This will lead to cost overruns and hurt the company’s profits.
Additionally, the company's subsidiary NEER's dependence on government policies and budgetary constraints may lead to delay and reduced returns through investment losses. Additionally, increasing indirect input costs are also among the other headwinds for the company.
NextEra Energy has outperformed the industry in the three months. The company’s shares gained 66.4% compared with the industry’s advance of 18.9%.
Zacks Rank & Key Picks
NextEra Energy currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the Utility space include Atlantic Power Corp. AT, UNITIL Corp. UTL and PNM Resources, Inc. PNM. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atlantic Power posted third-quarter 2017 earnings from continuing operations of 3 cents per share, beating the Zacks Consensus Estimate of 2 cents by 50%. The company’s 2017 estimates narrowed to 22 cents per share from a loss 27 cents in the last 30 days.
UNITIL posted third-quarter 2017 earnings from continuing operations of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents by 45.5%. The company’s 2017 estimates increased to $2.03 per share from $1.98 per share in the last 30 days.
PNM Resources posted third-quarter 2017 earnings from continuing operations of 93 cents per share, beating the Zacks Consensus Estimate of 85 cents by 9.4%. The company’s 2017 estimates increased to $1.86 per share from $1.85 per share in the last 30 days.
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