Earnings Scorecard: FPL

FPL Group Inc. (FPL) reported strong results for its first quarter of fiscal 2010 on Apr 27, 2010. Adjusted net earnings for the quarter came in at 94 cents per share, higher than the Zacks Consensus Estimate of 85 cents and the year-ago profit of 90 cents.
 
The better-than-expected first quarter 2010 results depicted robust demand from FPL’s utility subsidiary on the back of favorable weather conditions. However, revenues of $3,622 million were down 2.2% from the first quarter 2009 level and marginally missed the Zacks Consensus Estimate of $3,657 million.
 
Despite a decline in revenue at Florida Power & Light Company, the company continued to see improved earnings in the segment due to favorable weather which led to higher electricity sales and improved customer demand. On the other hand, NextEra Energy Resources saw declining earnings, despite revenue growth, mainly on account of lower wind energy generation across its fleet of wind turbines.
 
Agreement to Revisions

Following the earnings release on April 27, 2010, estimates for FPL haven’t shown significant changes. Thus, there is a lack of any definite trend. Of the 11 analysts providing estimates for the upcoming quarter, only one analyst has raised estimates in the last 7 days. Also, one analyst has revised estimates downward in the same period.
 
Of the 22 analysts providing estimates for full-year 2010, 2 raised estimates and one lowered in the last 7 days. Over the 30-day period, there were a couple of positive revisions, while negative revision totaled 5.
 
For the full-year 2011, one out of the 20 analysts covering the stock raised estimates in the 7-day and 30-day periods. However, 2 analysts lowered estimates in the last 7 days and 7 analysts lowered estimates in the last 30 days.
 
Magnitude of Revisions

Though there were no significant revisions as evident from the agreement of analyst estimates, the estimates for the forward periods saw slight downside. The Consensus for the upcoming quarter slipped 2 cents from $1.09 prior to 30 days. The full-year estimates for 2010 and 2011 also fell 2 cents from $4.36 and $4.57, respectively, 30 days back. Magnitude of revisions in the past 7 days were, however, largely stable.
 
Reiterate Neutral

We remain encouraged with FPL’s strong portfolio of assets, its leadership position in wind and attractive investment growth opportunities. Further, FPL’s increasing investment opportunities beyond its core wind development strategy, including solar, electric transmission and gas infrastructure, strengthen its already strong clean emission profile and provide long-term customer benefits. This makes for a robust earnings growth outlook going forward.
 
Additionally, on the development side, FPL continues to be on track with its pipeline of growth projects, which are expected to be accretive over the longer-term. The company plans to add 750-1,000 MW of wind generation per year through 2014. The company is also targeting 400-600 MW of solar generation over this period.
 
Nevertheless, we maintain a cautious approach due to the general economic environment in Florida which still remains challenging as evidenced by Florida’s unemployment rate, which rose to 12.3% in March of this year. Consequently, we remain on the sidelines and maintain our Neutral recommendation on FPL, which is supported by a Zacks #3 Rank (Hold).

Read the full analyst report on FPL