NextEra Energy Inc. (NEE) announced second-quarter 2011 operating earnings of $1.18 per share, sweeping past the Zacks Consensus Estimate of $1.09 by 9 cents. The quarterly results of the company also rose above the year-ago quarter earnings of $1.11 per share.
NextEra Energy recorded GAAP earnings of $1.38 cents per share for the second quarter of 2011 compared with $1.01 per share in the year-ago period. The difference of 20 cents between operating and GAAP earnings, during the second quarter, was due to mark-to-market effects of non-qualifying hedges and other than temporary impairments on certain investments, both of which relate to NextEra Energy Resources.
Total Revenue
NextEra Energy's total revenue in the quarter was $3.96 billion, up 10.3% from $3.59 billion reported in the year-ago period. Reported quarter revenue also surpassed the Zacks Consensus Estimate of $3.72 billion.
The solid revenue result in the second quarter is attributable to the strong performances at the company’s Florida Power & Light and NextEra Energy Resources segments.
Segment Results
Florida Power & Light: Total segment revenue for second-quarter 2011 was $2.8 billion versus $2.6 billion last year, reflecting a rise of 7.7%. Total energy sales during the current quarter were 28,757 million kilowatt/hr (KWh) compared with 27,815 million KWh in second-quarter 2010. Retail kilowatt-hour sales rose nearly 2.8%, primarily due to favorable weather and an increase of nearly 28,500 customers during the quarter.
Net earnings at Florida Power & Light segment reached 72 cents per share, up from 64 cents per share in the prior-year comparable quarter. Key earnings drivers during the quarter were the investments made by the company to increase the efficiency and reliability of its electric generation system, which directly benefits the residential and business customers through reduced fuel costs and lower bills.
NextEra Energy Resources: Segment revenue for second-quarter 2011 was $1.1 billion versus $0.97 billion in second-quarter 2010, reflecting a growth of 14.5%. The competitive energy business segment reported adjusted earnings of 37 cents per share compared to 48 cents per share reported in the year-ago quarter.
NextEra Energy Resources’ second quarter results were largely driven by a stronger performance by its wind resource and contributions from new assets, including the 150-MW White Oak wind facility, offset by extended refueling outages at the Seabrook and Point Beach nuclear facilities as well as write-downs of certain assets in West Texas and the Northeast.
Corporate and Other: Segment revenue for second-quarter 2011 was $55 million versus $46 million last year, increasing 19.6%. Second quarter earnings per share at the Corporate and Other segment was 9 cents compared to a loss of 1 cent in the second quarter of 2010. Gains in the quarter stemmed from the recognition of benefits related to tax-law changes in several states where the company operates.
Financial Update
The company continues to have a strong cash balance. Cash and cash equivalents as of June 30, 2011, were $287 million. Long-term debts of the company as of June 30, 2011, were $19.2 billion versus $18.0 billion as of December 31, 2010. The adjusted debt-to-equity ratio at the end of the second quarter 2011 was 46%, deteriorating from 44% at the end of 2010, mainly due to the issue of new debt in the quarter under review.
Outlook
NextEra Energy reaffirmed its 2011 earnings guidance to a range of $4.35 to $4.65 per share. It also expects earnings to grow at an average rate of 5% to 7% from 2011 through 2014.
At NextEra Energy Resources segment, the company remains focused on signing power purchase agreements for new wind projects as well as to grow its existing assets. This is expected to add increased visibility to future earnings and cash flow.
NextEra Energy Resources continues to expect to add 1,400-2,000 MW to its wind portfolio in 2011 and 2012 combined, extending its lead as North America’s largest wind developer.
Our View
We appreciate the initiatives employed by NextEra Energy for furthering its renewable energy generation portfolio.
Since late April 2011, the company has signed contracts for 632 MW of new wind generation, bringing total power purchase agreements signed for wind projects to be commissioned in the 2011-2014 timeframe to 1,585 MW. This total includes 469 MW for wind projects in Ontario, Canada, that the company expects to be online before the end of 2014.
At the same time, the company also continues to show progress at its rate-regulated utility subsidiary, Florida Power & Light Company, which remains focused on increasing the efficiency and reliability of its electric system.
NextEra Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock.
Based in Juno Beach, Florida, NextEra Energy Inc., through its subsidiaries, engages in the generation, transmission, distribution and sale of electric energy in Florida. The company competes primarily with the likes of Southern Company (SO) and Progress Energy Inc. (PGN).
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