Categories Analysis, Energy

NextEra Energy stock can strengthen your portfolio. Here’s why

The company targets total capital investments between $8 billion and $9 billion for the Florida Power & Light division this year

Energy infrastructure company NextEra Energy Inc (NYSE: NEE) is working to expand its renewables division significantly, considering the growing demand in that segment. The target is to at least double capacity in the clean energy business by the end of 2026. The company also sees stable earnings growth for the next three years and a 10% dividend growth through 2024.

Currently, NextEra’s stock is trading down 20% from the peak of December 2021 as it struggles to regain strength after withdrawing from the highs. In 2023, NEE experienced heavy fluctuation and slipped to a nine-month low this week. The Juno Beach-headquartered company, which owns America’s largest electric utility Florida Power & Light Company, recently hiked the quarterly dividend, as it did every year in the past. At $1.62 per share, the dividend offers a yield of 3.8%, which is well above the S&P 500 average.

On the Right Track

The fact that utility companies typically stay unaffected by economic cycles and grow at a steady, but relatively slow pace, makes the stock more attractive. So, NEE has what it takes to deliver long-term shareholder value. The regulated electric utility operation in Florida is a stable business with strong potential for future growth, given the population growth in the region. The prospects of NextEra Energy Resources, the wind & solar power business, are equally bright as it benefits from the ongoing transition away from carbon fuels toward cleaner alternatives.

From NextEra’s Q1 2023 earnings call:

“Given the volatility in gas and power prices over the last year and a half, we continue to see economics driving long-term decision-making and renewables remain the clear low-cost option for many customers. On the supply, solar supply-chain front, we continue to take constructive steps to mitigate potential future disruption. Nearly every one of our suppliers has repositioned their supply chains to manufacture solar panels in Southeast Asia using wafers and cells produced outside of China and all our suppliers are expected to meet the criteria established in the Commerce Department’s preliminary determination in the 2022 circumvention case by the end of 2023.”

Impressive Q1

In the first quarter, adjusted profit increased to $0.84 per share from $0.74 per share in the corresponding period of last year. Unadjusted profit was $2.09 billion or $1.04 per share, compared to a loss of $451 million or $0.23 per share in Q1 2022. Since 2020, NextEra’s earnings beat estimates in every quarter, including the latest quarter.

The bottom line benefited from a sharp increase in revenues to $6.72 billion from $2.89 billion last year. Revenues also exceeded expectations. During the quarter, around 2,020 megawatts of new renewables and storage projects were added to the company’s backlog. For fiscal 2023 and 2024, the management expects adjusted earnings per share to be in the ranges of $2.98-$3.13 and $3.23-$3.43, respectively.

Q2 Estimates

The company will be reporting second-quarter results on July 21 before the opening bell, amid expectations for a double-digit increase in revenues to $6.25 billion. It is estimated that adjusted profit, on a per-share basis, would remain unchanged at $0.81.

NextEra’s stock ended Monday’s trading session lower and settled slightly above $70, continuing the weakness seen since last week.


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