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NextEra Energy Inc. (NEE - Analyst Report), a public utility holding company engaged in the generation, transmission, distribution, and sale of electric energy, is slated to release its third-quarter 2012 earnings results before the market bell on October 24, 2012.

Recap, Second Quarter-2012

NextEra Energy reported quarterly earnings per share of $1.26, comfortably exceeding the Zacks Consensus Estimate of $1.16 per share as well as the year-ago earnings by 8 cents per share. The earnings outperformance stemmed from marked investments in the company’s Florida Power and Light business and significant growth in customer counts.

Revenue reported in the said quarter witnessed a 7.4% drop to $3,667 million from $3,961 million in the prior-ago quarter. Revenue also lagged the Zacks Consensus Estimate of $3,904 million.

The top-line plunge was largely due to lower contribution from wind assets and uncertainty regarding pending rate case approvals filed by Florida Power.

Guidance 2012

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

Zacks Consensus

The Zacks Consensus Estimate for the third quarter 2012 is $1.38 per share, higher than the earnings of $1.31 reported in the comparable year-ago quarter. At present, the Zacks Consensus Estimate for earnings ranges from $1.33 per share to $1.48 per share.

For 2012, the Zacks Consensus Estimate is $4.53 per share, up from $4.39 per share recorded in the earlier year. The current Zacks Consensus Estimate ranges between $4.47 per share and $4.65 per share.

Estimate Revision Trend

Agreement

For third quarter 2012, none of the eight estimates changed in 7 day and 30 day period. For 2012, from the total 19 estimates none moved north or moved down in the past 7 days while one lone estimate inched down for the last 30 days with no upward revision.

Magnitude

The Zacks Consensus Estimate for the third quarter remained stationary for the last week and month. For 2012, the consensus estimate notched down by a penny in the past month but remained stagnant in the past week.

Surprise History

With respect to earnings surprise, the company’s performance was healthy in three of the last four quarters. The bottom-line outcomes of the company beat our expectations in the fourth quarter 2011 and in the first as well as second quarters 2012, while earnings missed our expectation in the third quarter of 2011.

The earnings surprise in the last four quarters ranged from (8.4%) to 8.6%. The average surprise over the last four quarters remained a positive 1.62%.  

Our Recommendation

NextEra Energy’s continual investments in its power and renewable business would act as positive growth catalysts. Besides, the company’s retention of previously projected output capacity in both US and Canada is expected to boost shareholder confidence. Also, sustained expansion of customer footprint will spur near-term top-line.

However, regulatory obligations could result in higher capital expenditures and increase in operation costs, thereby impacting margins. Other negatives include commodity price fluctuations, weather variations in the US and uncertainty associated with rate cases filed by Florida Power & Light.

NextEra Energy operates in a very competitive energy market and faces intense competition from companies like TECO Energy, Inc. (TE - Analyst Report) and Southern Company (SO - Analyst Report).

Currently, we are maintaining a long-term Neutral recommendation on NextEra Energy Inc. The company has a Zacks #3 Rank implying a short-term Hold rating on the stock.

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