We recently updated a research report on NextEra Energy NEE. The company’s well-chalked out capital investment plan, natural gas pipeline projects, addition of renewable generation assets and strategic acquisitions are likely to drive its performance over the long run.
In the last four reported quarters, the company delivered an average earnings surprise of 2.7%. It has upwardly revised its long-term earnings growth guidance, courtesy of persistent renewable asset additions to the generation portfolio and execution across all businesses segments. For 2022 and 2023, it expects to grow 6-8%, off the expected increased 2021 adjusted earnings per share
Factors Acting as Tailwind
NextEra Energy has well-chalked plans to invest in the range of $50-$55 billion in different projects, which are extended from the last year through 2022. These investments will be directed to modernize and strengthen the company’s existing infrastructure, thereby enabling it to serve the expanding customer base more effectively. It serves nearly 10 million people through approximately 5 million customer accounts.
The company has plans to generate more energy from clean sources and systematic investments are helping it do the same. The investments are also aiding NextEra Energy to lower carbon emissions from the production process. These initiatives will help the company achieve the plan of reducing carbon dioxide emissions rate to 67% by 2025 from a 2005 base. In addition, utilities like Duke Energy Corporation DUK, Xcel Energy XEL and Dominion Energy D are investing considerably to lower carbon emissions, as well as add more renewable and clean sources to their generation portfolio.
NextEra Energy’s board of directors has approved a four-for-one split of its common stock, with an intention of making the stock ownership more accessible to a broader base of investors. The stock split is effective from Oct 26, 2020. As a result of the four-for-one stock split, NextEra Energy is updating adjusted earnings per share financial expectation ranges to reflect the increase in outstanding shares for the 2020-2023 time period. Taking into consideration the impact of the stock split, earnings per share for 2020, 2021, 2022 and 2023 are expected in the range of $2.18-$2.30, $2.40-$2.54, $2.55-$2.75, and $2.77-$2.97, respectively.
Headwinds
NextEra Energy’s nature of business is subject to complex and comprehensive federal, state as well as other regulations. The company’s regulated entity, FPL, depends on the Florida Public Service Commission for timely rate relief and cost recovery approvals. Any denial of such applications could materially affect its operational results. At present, NextEra Energy is working on a few capital projects. If the projects are delayed due to some uncontrollable events, it could result in cost overruns and in turn adversely impact the company’s profitability.
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