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Can NextEra Energy (NEE) Spring a Surprise in Q4 Earnings?

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Diversified utility NextEra Energy Inc. (NEE - Free Report) is scheduled to report fourth-quarter 2016 results on Jan 27, before the market opens. Last quarter, the company reported a positive earnings surprise of 5.45%. Let’s see how things are shaping up for this quarter.

Factors to Consider

Slightly warmer weather conditions in the company’s service territories are expected to affect the fourth quarter’s top line owing to lower heating usage.

NextEra Energy has nuclear generation assets, which involve heavy expenses in order to comply with government regulations. This tends to weigh on the company’s profitability to a large extent.

On the flip side, NextEra Energy completed the sale of its bandwidth infrastructure services FiberNet to Crown Castle International Corp. for $1.5 billion in the fourth quarter. This transaction is likely to prove accretive to NextEra Energy’s earnings in the to-be-reported quarter.

As part of the company’s initiatives concerning clean energy, NextEra Energy’s affiliate Florida Power & Light Company (“FPL”) secured approval from the Florida Public Service Commission last October to purchase a coal-fired facility, Indiantown Cogeneration L.P., for the purpose of shutting it down to reduce annual carbon dioxide emissions of 657,000 tons and cut rates for customers. Further, in Dec 2016, FPL connected three solar power plants to the grid, each with a capacity of 74.5 megawatts.

Earnings Whispers

Our proven model does not conclusively show that NextEra Energy will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP of the company is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.29. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NextEra Energy, Inc. Price and EPS Surprise

 

NextEra Energy, Inc. Price and EPS Surprise | NextEra Energy, Inc. Quote

Zacks Rank: Though NextEra Energy’s Zacks Rank #2 increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Price Movement

Shares of NextEra Energy gained 11.6% over the past 12 months, outperforming the Zacks categorized Utility – Electric Power industry’s gain of 7.8%.

This outperformance can be attributed to NextEra Energy’s strategy of divesting non-core assets to focus on core areas and deploying the divestment proceeds for acquisitions that are in sync with its long-term growth policy and will strengthen its balance sheet.

 

Stocks to Consider

Here are a few stocks in the utility space worth considering on the basis of our model, as they have the right combination of elements to post an earnings beat this quarter:

Black Hills Corporation (BKH - Free Report) is expected to report earnings on Feb 1. It is has an Earnings ESP of +7.07% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exelon Corporation (EXC - Free Report) has an Earnings ESP of +4.65% and a Zacks Rank #2. It is expected to release its quarterly numbers on Feb 8.

Pinnacle West Capital Corporation (PNW - Free Report) has an Earnings ESP of +4.08% and a Zacks Rank #2. It is slated to report earnings on Feb 24.

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