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NextEra Energy: Investment in Clean Energy to Fuel Growth

AEE NEE DTE AVA

Trades from $3

On Nov 18, we issued an updated research report on NextEra Energy, Inc. (NEE - Free Report) . The company’s focus on renewable generation should boost its performance over the long haul. However, delays in project completion and operational risks constitute headwinds.

Recently, NextEra Energy reported third-quarter 2016 adjusted earnings of $1.74 per share, outpacing the Zacks Consensus Estimate of $1.65 by 5.5%. Quarterly earnings were also up 8.8% year over year on the back of higher contributions from its subsidiaries NextEra Energy Resources (“NEER”) and Florida Power and Light Company (“FPL”). Moreover, the company’s operating revenues came in at $4,805 million, beating the Zacks Consensus Estimate of $4,704 million by nearly 2.2%.

NextEra’s focus on renewables over the last few years has been compelling. This October, FPL secured approval from the Florida Public Service Commission to purchase the coal-fired facility, Indiantown Cogeneration L.P., for the purpose of shutting it down eventually, thereby reducing annual carbon dioxide emissions of 657,000 tons and cutting the rates for customers. Moreover, construction of three new cost-effective 74.5 MW solar power plants, aimed to triple the company’s use of solar energy, is presently underway.

Meanwhile, NEER brought 1,500 MW of renewable power in service in 2015 and has plans to add 2,500 MW of renewable projects in 2016. The utility expects to bring on line nearly 2,800–5,400 MW of new renewable projects over the 2017–2018 timeframe.

On the flip side, delay in completion of ongoing capital projects within budget or time due to a rise in cost of inputs and regulatory compliance costs. Moreover, its financial performance primarily depends on its ability to manage the operations of its transmission and distribution businesses. But these operations sometimes face operational risks, including breakdown, failure or damage of equipment’s or processes, accidents and labor disputes, which add to its costs.

For instance, FPL’s service territories were affected by Hurricane Hermine in Sep 2016 and Hurricane Matthew in Oct 2016, resulting in extensive restoration costs. The company plans to recover these costs through surcharges from customers, resulting in bill increases.

Zacks Rank & Key Picks

NextEra Energy carries a Zacks Rank #3(Hold). A few better-ranked stocks in the same space include Avista Corp. (AVA - Free Report) , Ameren Corporation (AEE - Free Report) and DTE Energy Company (DTE - Free Report) .

Avista has seen one upward estimate revision for 2016 over the last 60 days. The stock carries a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameren Corp., another Zacks Rank #2 stock, has seen four upward estimate revisions for 2016 over the last 60 days.

DTE Energy has seen six upward estimate revisions for 2016 over the last 60 days. The stock carries a Zacks Rank #2 as well.

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