NextEra Energy: Mixed Quarterly Results, Price & Supply Issues Continue

Shares of NextEra Energy (NYSE: NEE) declined 6.5% at Thursday’s close after the energy company posted mixed results for the first quarter of 2022. The losses continued today, with the stock down 1.6%. Quarterly adjusted earnings beat analysts’ expectations, while revenues disappointed. 

NextEra expects about 2.1 to 2.8 gigawatts (GW) of its solar and storage build to move from 2022 to 2023 amid price uncertainty in the solar sector and the hunt for alternative supplies. This is due to the ongoing U.S. trade probe initiated by the U.S. Department of Commerce (DoC) in late March.

The outcome, expected by the end of 2023, could result in retroactive tariffs of 50% to 250% on solar panels, which are imported from four Southeast Asian countries. 

In response to issues in the sector, NextEra CFO Kirk Crews said, “Despite the delay, given our competitive advantages, including the strength of our supplier relationships and contracts, we remain comfortable with our current development expectations for wind, solar and storage, which are to build roughly 23 to 30 gigawatts over the four-year period from 2021 through the end of 2024.” 

NextEra Energy is one of the largest electric power generators in the United States. Through its Florida Power & Light Company (FPL) business, the company provides clean, reliable, and affordable electricity across Florida. 

Results in Detail 

NextEra Energy reported Q1 adjusted earnings of $0.74 per share, beating the Street’s estimates of $0.69. The company recorded adjusted earnings of $0.67 per share in the same quarter last year. Adjusted income came in at $1.46 billion, up 9.8%. Results were driven by continued investments in the business. 

Meanwhile, operating revenue dropped 22.5% to $2.89 billion and missed analysts’ expectations of $5.1 billion. 

Segmental Results 

The Florida Power & Light company serves more than 5.7 million customer accounts. It supports over 12 million residents across Florida and is the largest vertically integrated rate-regulated electric utility in the U.S. The segment reported operating revenues of $3.71 billion, up 24.9% year-over-year. 

Most importantly, FPL completed the regulatory integration of Gulf Power company and now customers are served under unified rates, effective January 1, 2022. 

During the quarter, FPL commissioned around 450 megawatts of additional cost-effective solar projects. Currently, the company operates over 3,600 megawatts of solar. 

Furthermore, revenues at NextEra Energy Resources (NEER) came in at a negative $800 million, compared with revenues of $781 million in the prior-year quarter. 

NEER reported another strong quarter for origination, adding approximately 1,770 net MW of renewables and battery storage projects to its backlog. 

Outlook 

Encouragingly, NextEra CEO John Ketchum said, “Florida’s economic strength and the rapid growth in FPL’s customer base bolsters the company’s confidence in its disciplined investment strategy…Our continued origination success is reflective of our ability to continue leveraging our competitive advantages to deliver clean energy solutions to meet our customers’ ongoing demand for low-cost renewables and storage.” 

For 2022, the company reiterated adjusted earnings per share expectations in the range of $2.75 to $2.85. 

From 2023 through 2025, NEE expects to grow about 6% to 8% per year over the expected 2022 adjusted earnings per share. 

Wall Street’s Take 

Following the results, CFRA maintained a Buy rating on NextEra and raised the price target to $92 (22.1% upside potential from current levels) from $90. 

Consensus among analysts is a Strong Buy based on 10 Buys and three Holds. The average NextEra price target of $94.69 implies 25.7% upside potential. Meanwhile, shares have lost 16.4% over the past year. 

Smart Score Rating 

NextEra scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. 

Bottom Line

The strong fundamental standing and rapidly expanding alternative energy industry, NextEra appears to be in a good position. Moreover, the encouraging favorable regulatory backdrop it enjoys could act as an important tailwind in this otherwise blustery market.

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