NextEra Energy, Inc. NEE announced second-quarter 2015 adjusted earnings of $1.56 per share, beating the Zacks Consensus Estimate of $1.50 by 4%. On a year-over-year basis, earnings climbed 9.1% on the heels of higher revenues from Florida Power & Light Company and NextEra Energy Resources.
On a GAAP basis, NextEra Energy recorded second-quarter earnings of $1.59 per share compared with $1.12 per share a year ago. The variance between adjusted and GAAP earnings, during the quarter, was due to a 5 cent impact of unrealized mark-to-market gain from non-qualifying hedges, a 1 cent loss associated with other than temporary impairments losses and a merger-related expense of 1 cent.
Total Revenue
In the second quarter, NextEra Energy’s operating revenues were $4,358 million, surpassing the Zacks Consensus Estimate by 2.6%. Quarterly revenues increased 8.2% from $4,029 million a year ago.
Segmental Results
Florida Power & Light Company (FPL): In the second quarter, the segment reported revenues of $2,996 million, up 3.7% year over year. This was primarily driven by an improving Florida economy which led to customer additions. FPL catered to 66,000 new customer accounts in the second quarter of 2015 in comparison to last year. FPL’s retail sales grew 7.6% year over year.
NextEra Energy Resources (NEER): Revenues from this segment shot up nearly 22.1% to $1,265 million from the prior-year quarter. The upside was attributable to higher revenues from the contracted renewable business.
Corporate and Other: The segment’s quarterly revenues were $97 million, down 6.7% from $104 million a year ago.
Operational Update
In the quarter under review, NextEra Energy’s total operating expenses increased 4.4% year over year to $3,212 million. The uptick in expenses was due to higher depreciation and amortization expenses and increase in operations and maintenance expense as well as a merger-related expense of $9 million.
Operating income escalated nearly 20.5% to $1,146 million from $951 million a year ago.
NextEra’s interest expenses in the reported quarter were $280 million, down from $305 million in the prior-year quarter.
Financial Update
NextEra Energy had cash and cash equivalents of $551 million as of Jun 30, 2015, compared with $577 million as of Dec 31, 2014.
Long-term debts as of Jun 30, 2015, were $25.2 billion, up from $24.4 billion as of Dec 31, 2014.
NextEra Energy’s cash flow from operating activities in the first half of 2015 was $2,934 million compared with $2,448 million a year ago.
Business Update
As a part of modernizing its generation fleet, FPL plans to add a high-efficiency energy center in Okeechobee County, FL. The facility will have a capacity of 1,622 megawatt (“MW”). The plant will be built at a cost of approximately $670 per kilowatt and is expected to commence service in mid 2019.
FPL continues to make progress on the Port Everglades Clean Energy Center. It is expected to be operational in mid-2016. The third next-generation combined-cycle natural gas generation modernization project is expected to bring about energy efficiency.
FPL is on track with three new large-scale solar power plants announced earlier this year, which are expected to enter service before the end of 2016. NEER ended the quarter with a contracted renewables backlog of 3,100 MW.
The joint venture with EQT Corp. EQT, which is called Mountain Valley Pipeline joint venture, is in its permitting process. The project is expected to go online by the end of 2018. This pipeline will help the company cater to growing demand by connecting the Marcellus and Utica shales to the Southeast markets of the U.S.
Guidance
NextEra reiterated its 2015 earnings guidance in the range of $5.40–$5.70 per share and increased the same for 2016 to a range of 5.85–$6.35 per share from an earlier projection of 5.75–$6.25 per share. The company issued its guidance for 2018 in a band of $6.60–$7.10 per share.
Taking 2014 as the base year, NextEra expects adjusted EPS to grow at a compounded annual rate of 6–8% through 2018.
Other Utility Releases
FirstEnergy Corp. FE reported second-quarter 2015 operating earnings of 53 cents per share, outpacing the Zacks Consensus Estimate by 10.4%.
Xcel Energy Inc. XEL recorded operating earnings of 39 cents per share in the second quarter of 2015, missing the Zacks Consensus Estimate by a penny.
Our Take
NextEra Energy’s relentless efforts to invest in energy efficient and clean energy projects were reflected in its financial results. The company delivered impressive top- and bottom-line figures beating the Street estimates.
The company has quite a few projects under construction waiting to come online in the near term. NextEra Energy is expanding its fleet of natural gas fired operations which is helping it to cut electric rates for its customers. NextEra’s renewable expansion initiative has also been impressive, which will help the company meet regulatory mandates on carbon emission. Moreover, the company’s investment in midstream operations will bode well for its bottom line.
NextEra Energy currently has a Zacks Rank #3 (Hold).
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