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Why Is NextEra Energy Partners (NEP) Down 2.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for NextEra Energy Partners (NEP - Free Report) . Shares have lost about 2.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NextEra Energy Partners due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

NextEra Energy Partners Posts Q4 Loss, Misses on Sales

NextEra Energy Partners, LP reported a loss of 12 cents per unit for fourth-quarter 2021 versus the Zacks Consensus Estimate of earnings of 45 cents. The firm reported earnings of 85 cents per unit in the year-ago period.

Revenues

For the quarter under review, the firm’s revenues of $232 million missed the Zacks Consensus Estimate of $354 million by 34.4%. Revenues improved 9.4% year over year due to contribution from new projects.

Highlights of the Release

In the fourth quarter, NextEra Energy Partners closed the initial funding of its lowest-cost convertible equity portfolio financing to date. The 10-year, roughly $820 million convertible equity portfolio financing was used to partially fund the acquisition of a 50% interest in a renewables portfolio, consisting of approximately 2,520 megawatts (MW) of newly constructed or in-construction renewable projects and 115 MW of integrated battery storage.

In 2021, NextEra Energy Partners acquired interests in nearly 1,900 MW of long-term contracted renewables and storage assets from NextEra Energy Resources. NextEra Energy Partners also successfully completed two acquisitions of renewable energy assets from third parties, adding nearly 500 MW of operating wind projects.

For the fourth quarter, the partnership’s operating income summed $23 million, down 50% from $46 million in the year-ago period.

Financial Condition

NextEra Energy Partners had cash and cash equivalents worth $147 million as of Dec 31, 2021 compared with $108 million on Dec 31, 2020.

Long-term debt was $5,294 million as of Dec 31, 2021 compared with $3,376 million in the corresponding period of 2020.

Net cash provided by operating activities in 2021 was $677 million, 1.8% higher than $665 million in the comparable period of last year.

Distribution Update

The board of directors of NextEra Energy Partners announced a quarterly distribution of 70.75 cents per unit. The new annualized rate is $2.83 per common unit. Cash distribution per common unit increased nearly 15% on an annualized basis from the fourth quarter of 2020. The distribution will be payable on Feb 14, 2022, to unitholders of record as of Feb 4, 2022.

Guidance

NextEra Energy Partners expects 2022 EBITDA in the range of $1.775-$1.975 billion and cash available for distribution within $675-$765 million.

NextEra Energy Partners expects the annualized rate of fourth-quarter 2022 distribution, which is payable in February 2023, in the range of $3.17-$3.25 per common unit compared with the current rate of $2.83. The new rate is in sync with NextEra Energy Partners’ expectation of 12-15% per year growth in limited partner distributions through at least 2024, subject to the approval of the board of directors.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -37.23% due to these changes.

VGM Scores

Currently, NextEra Energy Partners has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, NextEra Energy Partners has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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