NextEra Energy in Neutral Lane

Florida based NextEra Energy Inc. (NEE - Analyst Report) posted a mixed performance in the second quarter 2012 with earnings edging out the Zacks Consensus Estimate while the top line lagged expectations. The company recorded earnings of $1.26 per share, 8 cents higher than the year-ago quarter due to marked investments in the company’s Florida Power and Light business and continued customer growth.

We believe the company’s persistent adherence to a growth-by-investment strategy will act as a significant top-line driver. However, stringent environmental laws and regulations often lead to higher expenditures and operations cost, thereby impacting margins.

Florida Power and Light is expected to deliver a better performance on the back of increased customer growth. The utility with its clean energy emission profile will likely continue to provide reliable and affordable utility services to its customers thus boosting the company’s growth in the future.

However, we believe that the improved economic condition in Florida is only temporary. Besides, unfavorable supply cost and potential volatility in market prices of fuel, electricity and other renewable energy commodities could create an undesirable impact on NextEra Energy’s earnings outcome.

The company’s management nevertheless focuses on its objective of keeping an efficient long-term capital structure which will ensure the smooth development of ongoing projects.

On the other hand, unplanned outages, weather variations and uncertainty regarding the company’s pending rate cases related to its St. Lucie Unit 2 could hurt NextEra Energy’s financials.

NextEra Energy maintained its earnings expectation for 2012 in the range of $4.35 per share to $4.65 per share. Similarly, the company maintained its adjusted earnings estimates for 2014 in the range of $5.05 per share to $5.65 per share.

The Zacks Consensus Estimates for the third quarter and full year 2012 are currently pegged at $1.40 per share and $4.53 per share, respectively.

NextEra Energy’s closest competitor is Teco Energy Inc. (TE - Analyst Report). The company holds a Zacks #3 Rank implying a short-term Hold rating.

Based in Juno Beach, Florida, the company through its subsidiaries engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. The company is involved in the generation of renewable energy from wind and solar projects.