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Why Is NextEra (NEE) Up 0.5% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for NextEra Energy (NEE). Shares have added about 0.5% in that time frame, underperforming 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 Q2 Earnings Beat Estimates, Sales Miss

NextEra Energy, Inc.  reported second-quarter 2020 adjusted earnings of $2.61 per share, surpassing the Zacks Consensus Estimate of $2.50 by 4.4%. In addition, the reported earnings were up 11% from $2.35 per share in the prior-year quarter. The year-over-year improvement in earnings was due to strong performance across all businesses despite the challenges created by the COVID-19 outbreak.

On a GAAP basis, the company recorded earnings of $2.59 per share, up 1.2% from $2.56 reported in the year-ago quarter.

Total Revenues

In the second quarter, NextEra Energy’s operating revenues were $4,204 million, lagging the Zacks Consensus Estimate of $5,270 million by 20.2%. The reported revenues were down 15.4% year over year.

Segment Results

Florida Power & Light Company: Revenues from the segment amounted to $2,825 million, down 10.5% from the prior-year figure of $3,158 million. The segment’s earnings came in at $1.52 per share, up 10.9% from $1.37 recorded in the prior-year quarter.

Gulf Power Company (Gulf Power): Total segment revenues amounted to $333 million, down 9% from the year-ago figure. This segment’s earnings per share totaled 11 cents in the reported quarter, up 2 cents from the year-ago level.

NextEra Energy Resources: Revenues from the segment amounted to $1,077 million, down 26.5% from the prior-year quarter. Quarterly earnings from the segment came in at 97 cents per share, down 30.2% from $1.39 in the year-ago quarter.

Corporate and Other: The segment’s operating loss in the reported quarter was 1 cent compared with a loss of 29 cents per share in the year-ago period.

Highlights of the Release

Despite the economic challenges posed by the novel coronavirus outbreak, the company’s capital projects continued to progress per plans. To serve customers more efficiently, Florida Power & Light and Gulf Power filed an application with the Federal Energy Regulatory Commission in May for approval of an internal reorganization whereby Gulf Power would merge into FPL.

In the reported quarter, NextEra Energy’s total operating expenses were down 6.4% from the prior-year level to $3,018 million.

Interest expenses in the quarter were $320 million, down 46.7% from the year-ago period.

NextEra Energy Resources expanded the contracted renewables backlog by adding 1,730 megawatts of renewable projects during the second quarter.

Financial Update

NextEra Energy had cash and cash equivalents of $1,009 million as of Jun 30, 2020 compared with $600 million on Dec 31, 2019.

Long-term debt as of Jun 30, 2020 was $42.67 billion, up from $37.54 billion on Dec 31, 2019.

Cash flow from operating activities in first-half 2020 was $3.79 billion compared with $3.28 billion in the prior-year period.

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. It expects contributions from Florida acquisitions to boost earnings by 15 cents in 2020 and 20 cents in 2021. For 2020, the company expects adjusted earnings per share in the range of $8.70-$9.20.

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

The firm 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, fresh estimates flatlined during the past month.

VGM Scores

Currently, NextEra has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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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