NextEra Energy Inc. (NEE) announced third-quarter 2011 operating earnings of $1.31 per share, 14 cents lower than the year-ago quarter. The results of the company were also lower than the Zacks Consensus Estimate by 11 cents.
NextEra Energy recorded GAAP earnings for the third quarter of 2011 of 97 cents per share compared with $1.74 per share in the year-ago period.
The difference of 34 cents between operating and GAAP earnings, during the third quarter, was due to mark-to-market effects of non-qualifying hedges (9 cents), loss on assets held for sale (23 cents) and other than temporary impairments on certain investments (2 cents).
Total Revenue
NextEra Energy's total operating revenue for third-quarter 2011 was $4.38 billion, down 6.6% from $4.69 billion reported in the year-ago period. Uninspiring performance at NextEra Energy Resources led to the year-on-year fall in revenue.
Reported quarter revenue also missed the Zacks Consensus Estimate of $4.48 billion.
Segment Results
FloridaPower & Light (FPL): Total segment revenue for third-quarter 2011 was $3.15 billion versus $3.11 billion in third-quarter 2010, reflecting a growth of 1.2%. Total energy sales during the current quarter were 31,699 million kilowatt/hr (KWh) compared with 31,817 million KWh in third-quarter 2010.
Customer base expansion of 24,000 year over year and a 13 cent increase in average KWh price aided the annualized segment revenue growth.
NextEra Energy Resources: Total revenue for third-quarter 2011 was $1.17 billion versus $1.53 billion in third-quarter 2010, reflecting a decline of 23.3%. The downside resulted from reduced contribution from wind and solar investments compared to the previous year.
Corporate and Other: Total revenue for third-quarter 2011 was $58 million versus $47 million in third-quarter 2010, increasing 23.4%.
Operational Update
Total operating expenses during the quarter decreased by 2.67% year over year. The decline in operating expenses was primarily owing to a 4.0% year-over-year fall in input costs, and a 6.6% decline in depreciation and amortization expenses.
Lower operating cost could not make up for the top-line disappointment, resulting in a 19% drop in operating income to $911 million from $1,125 million in the prior-year quarter.
Interest expenses in the third quarter swelled by 7.3% to $265 million from $247 million at the end of third quarter 2010, sparked off by a higher debt level.
Financial Update
The company continues to have a strong cash balance. Cash and cash equivalents as of September 30, 2011, were $640 million, up from $302 million as of December 31, 2010.
Long-term debts of the company as of September 30, 2011, were $20 billion versus $18 billion as of December 31, 2010. The debt-to-equity ratio at the end of the third quarter 2011 was 47%, deteriorating from 44% at the end of 2010.
Outlook
NextEra Energy now expects earnings for 2011 to be on the lower end of the previously forecast range of $4.35 to $4.65. The company expects adjusted earnings per share for 2012 to be in the range of $4.35 to $4.65.
NextEra expects earnings to grow at an average rate of 5% to 7% from 2011 through 2014.
Peer Comparison
Progress Energy Inc. (PGN) competing directly with NextEra Energy reported third quarter earnings from continuing operations of $1.16 per share, falling short of the Zacks Consensus Estimate of $1.24 and the year-ago earnings of $1.23.
Progress Energy's total revenue of $2.75 billion lagged the Zacks Consensus Estimate of $3.1 billion and the year-ago revenues of $2.9 billion.
Our View
Despite the earnings and top-line miss, we appreciate the initiatives employed by NextEra Energy for furthering renewable energy generation. At present the company has 1,310 megawatts of new wind projects on long-term contracts scheduled to go into service in 2011 or 2012.
FPL has plans to invest $10.5 billion and $11.5 billion between 2011 and 2014. These investments are aimed to improve the company’s operational efficiency and supply reliable and clean energy to its consumers.
We eagerly await the outcome of these large scale development projects. We believe if the upgrades are completed as per schedule it will surely add an impetus to the earnings capability of the company going forward.
NextEra Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Based in Juno Beach, Florida, NextEra Energy Inc., through its subsidiaries, engages in the generation, transmission, distribution and sale of electric energy in Florida.
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