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NextEra (NEE) Up 6.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
In the latest trading session, iQIYI, Inc. Sponsored ADR (IQ) closed at $18.18, marking a +0.94% move from the previous day.

It has been about a month since the last earnings report for NextEra Energy (NEE). Shares have added about 6.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NextEra due for a pullback? 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's Q1 Earnings Beat Estimates, Revenues Lag

NextEra Energy, Inc. reported first-quarter 2019 adjusted earnings of $2.20 per share, beating the Zacks Consensus Estimate of $2.01 by 9.4%. Moreover, the reported earnings were up 12.2% on a year-over-year basis.

The earnings growth was led by solid contribution from all business segments.

On a GAAP basis, NextEra recorded earnings of $1.41 per share, down from $3.92 a year ago.

Total Revenues

In the first quarter, NextEra’s operating revenues were $4,075 million, lagging the Zacks Consensus Estimate of $4,109 million by 0.8%. However, the reported revenues were up 5.6% year over year.

Segmental Results

Florida Power & Light Company: The segment’s earnings came in at $1.22 per share, up 19.6% from $1.02 recorded in the prior-year quarter. Revenues amounted to $2,618 million, down marginally from the prior-year quarter.

Gulf Power Company: NextEra acquired a rate-regulated electric utility during the quarter. This buyout contributed 8 cents to its earnings in first quarter. Total segment revenues amounted to $328 million.
 
NextEra Energy Resources: Quarterly earnings from the segment came in at 93 cents per share, up 12% from 83 cents in the year-ago quarter. Revenues amounted to $1,135 million, down 8.5% from the prior-year quarter.

Corporate and Other: The segment’s operating loss in the reported quarter was 3 cents versus earnings of 11 cents in the year-ago period.
 
Highlights of the Release

In the reported quarter, NextEra’s total operating expenses were up 5.1% from the prior-year level to $2,798 million.

Interest expenses in the quarter were $714 million, up 215.9% from the year-ago period.

In the reported quarter, Florida Power & Light Company’s total average customer count went up by 100,000 on a year-over-year basis.

NextEra Energy Resources expanded its contracted renewables backlog by adding 1,000 MW of renewable projects during first-quarter 2019.

Financial Update

NextEra had cash and cash equivalents of $972 million as of Mar 31, 2019 compared with $638 million on Dec 31, 2018.

Long-term debt as of Mar 31, 2019 was $29.88 billion, up from $26.78 billion on Dec 31, 2018.

Cash flow from operating activities in first-quarter 2019 was $1,597 million compared with $1,291 million in the prior-year period.

Guidance
 
NextEra reiterated its adjusted earnings guidance in the range of $8.00-$8.50 for 2019. 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. NextEra continues to expect 2020 adjusted earnings per share in the range of $8.70-$9.20.

The company expects assets acquisition in Florida to contribute 15 cents and 20 cents to earnings in 2020 and 2021, respectively.

It also expects dividend per share to improve 12-14% per year through at least 2020, off a 2017 base of $3.93.

NextEra currently aims to add 10,100-16,500 MW of renewable power projects in its portfolio within the 2017-2020 time frame.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, NextEra has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 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.

Outlook

NextEra has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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