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NextEra (NEE) Up 6.7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for NextEra Energy (NEE). Shares have added about 6.7% 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 Energy Lags Q4 Earnings & Revenue Estimates

NextEra Energy, Inc.  reported fourth-quarter 2019 adjusted earnings of $1.44 per share, lagging the Zacks Consensus Estimate of $1.54 by 6.5%. In addition, the reported earnings were down 3.4% from $1.49 per share in the prior-year quarter.

On a GAAP basis, NextEra Energy recorded earnings of $1.99 per share, up 126.1% from 88 cents reported in the year-ago quarter.

Total Revenues

In the fourth quarter, NextEra Energy’s operating revenues were $4,588 million, lagging the Zacks Consensus Estimate of $4,793 million by 4.3%. However, the reported revenues were up 4.5% year over year.

Segment Results

Florida Power & Light Company: Revenues from the segment amounted to $2,925 million, down 0.3% from the prior-year figure of $2,935 million. The segment’s earnings came in at 81 cents per share, down 4.7% from 85 cents recorded in the prior-year quarter.

Gulf Power Company: Total segment revenues amounted to $353 million. This segment’s earnings per share totaled 5 cents in the reported quarter.

NextEra Energy Resources: Revenues from the segment amounted to $1,338 million, down 10.1% from the prior-year quarter. Quarterly earnings from the segment came in at 66 cents per share, up 1.5% from 67 cents in the year-ago quarter.

Corporate and Other: The segment’s operating loss in the reported quarter was 8 cents versus earnings of 3 cents per share in the year-ago period.
 
Highlights of the Release


In the reported quarter, NextEra Energy’s total operating expenses were up 13% from the prior-year level to $3,710 million.

Interest expenses in the quarter were $188 million, down 73.5% from the year-ago period.

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

NextEra Energy Resources expanded the contracted renewables backlog by adding 5,800 MW of renewable projects during 2019.

Financial Update

NextEra Energy had cash and cash equivalents of $600 million as of Dec 31, 2019 compared with $638 million on Dec 31, 2018.

Long-term debt as of Dec 31, 2019 was $37.54 billion, up from $26.78 billion on Dec 31, 2018.

Cash flow from operating activities in 2019 was $8.15 billion compared with $6.59 billion in 2018.

Guidance
 
NextEra Energy 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. NextEra Energy expects 2022 adjusted earnings per share in the range of $10-$10.75, indicating 6-8% growth from 2021 EPS.

The company currently aims to add 11,500-18,500 MW of renewable power projects to its portfolio within the 2019-2022 time frame.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, NextEra has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, 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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