NextEra's (NEE) Renewable Focus & Long-Term Investments Aid

We have issued an updated research report on NextEra Energy (NYSE:NEE) . The company is well poised to benefit from the $36.6-billion long-term investment plan to strengthen its infrastructure. The company will also gain from positive economic fundamentals in its service territories, which will help it achieve the targeted compound annual earnings growth rate of 6-8% through 2021, from an expected base of $7.70 per share in 2018.

Let us delve deeper to find out the factors that are driving the company and those that might act as headwinds.

Factors Driving the Company

NextEra has well-chalked plans to invest nearly $36.6 billion in different projects from the remainder of 2019 through 2023. These investments will be directed to modernize and strengthen the company’s existing infrastructure, enabling it to serve its expanding customer base more effectively.

Florida Power & Light Company, a subsidiary of NextEra, is working to lower its carbon footprint. The company announced “30-by-30” plan to install more than 30 million solar panels in Florida by 2030, which will substantially increase its renewable generation capacity.

NextEra also invests in natural gas pipeline operations. The demand for natural gas is rising and the company acquired Gulf Power Company, Florida City Gas and ownership stakes in two natural gas power plants from Southern Company (NYSE:SO) to capitalize on the rising demand for this clean fossil fuel. These buyouts will further expand regulated natural gas operation of NextEra and be accretive to earnings over the long term.

Factors That May Offset the Positives

NextEra’s financial performance primarily depends on its ability to manage operations of transmission and distribution businesses. Transmission and distribution operations sometimes face natural disasters and several operational risks, including breakdown, failure or damage of equipment or processes, which can adversely impact profitability.

The operation and maintenance of NextEra and Florida Power & Light Company's nuclear generation facilities involve environmental, health and financial risks that could result in fines or closure of the facilities, as well as increased costs and capital expenditures. If a scheduled outage in a nuclear unit lasts longer than anticipated, it will adversely impact production and profitability of the company.

Utilities Focusing on Renewables

Utilities are spending in a systematic manner to strengthen and expand existing infrastructure. These are gradually moving out of polluting sources of fuel, and focusing on natural gas and renewable sources to generate electricity.

In addition to NextEra, companies like Dominion Energy (NYSE:D) and Xcel Energy (NASDAQ:XEL) , among others, are investing substantially to lower carbon emissions from their respective generation portfolio.

Price Performance

Shares of NextEra have outperformed its industry in past 12 months.

Zacks Rank

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.

This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.

See their latest picks free >>