NextEra Energy Beats on Q2 Earnings, Expects 6% – 8% Long-Term EPS Growth

NextEra Energy (NEE) reported stronger-than-expected Q2 EPS topping estimates driven by robust performance across all segments. Shares of the electric utility giant gained 1.4% on July 23 to close at $77.20.

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The company reported adjusted earnings of $0.71 per share, beating analysts’ expectations of $0.68 per share. However, revenues of $3.93 billion lagged the consensus estimate of $4.97 billion. The company reported earnings of $0.65 per share in the prior-year period.

Management declared a 15% annualized increase in its quarterly distribution to $0.6625 per common unit. This implies an annual dividend of $2.65 per common unit. (See NEE stock charts on TipRanks)

NextEra Energy’s CEO Jim Robo commented, “With continued access to low-cost capital and accretive acquisition opportunities, NextEra Energy Partners is as well-positioned as ever to grow limited partner distributions per unit by 12% to 15% through 2024.”

He further added, “We continue to believe NextEra Energy Partners offers a compelling investor value proposition and look forward to delivering on that potential over the coming years.”

Provided Long-Term EPS Outlook

Looking forward, the company remains on track with its growth plans and reiterated its full-year guidance. The company forecast adjusted earnings in the range of $2.40 to $2.54 per share.

Furthermore, the company expects EPS to grow at 6% to 8% annually from 2021 EPS for the next two years. Consequently, EPS in 2022 and 2023 is expected to be in the range of $2.55 to $2.75 and $2.77 to $2.97 per share, respectively.

Notably, the company expects its annual dividends to grow 10% every year through at least 2022.

Wind and Solar Portfolio Acquisition

To expand and diversify its portfolio, management plans to acquire approximately 590-megawatt (MW) net interest in a geographically diverse portfolio of wind and solar projects from NextEra Energy Resources, LLC for $563 million.

The deal is expected to be immediately accretive and add approximately $90 million to $100 million to adjusted EBITDA and $41 million to $49 million to cash available for distributions (CAFD) annually for the next 5 years starting from 2021.

The acquisition is expected to close before the end of this year, subject to certain regulatory approvals.

Following the results, Bank of America Securities analyst Julien Dumoulin Smith reiterated a Buy rating on the stock with the price target of $84 (8.8% upside potential).

Smith forecasts the company to report earnings of $0.85 per share for the third quarter of 2021.

Consensus among analysts is a Moderate Buy based on 5 Buys and 2 Holds. The average NextEra Energy price target of $85.33 implies 10.5% upside potential to current levels.

NEE scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.