We maintain our cautious stance on NextEra Energy Inc. (NEE) despite its second quarter results surpassing our expectation as the company is subject to complex and comprehensive federal, state and other regulation, which can impact the financial results of the company.
NextEra Energy's competitive energy business has also run up against operating and development risk, limiting top-line growth at this segment that can affect overall results.
The positive attributes of NextEra includes a well-managed, high-quality regulated electric utility subsidiary, Florida Power & Light Company, serving high-growth areas of Florida. The company can also boast of an impressive portfolio of wind generation assets which will stand NextEra in good stead for the next several years.
Impeding the company's positives are its dependence on favorable weather conditions for perked up demand and a turbulent economy which is yet to recover fully from the meltdown, resulting in a much slower customer growth and customer usage. Hence, we continue to maintain our neutral stance until more positive catalysts drive the stock.
Recently, the company's competitive energy subsidiary NextEra Energy Resources LLC has agreed to sell its ownership interest in a portfolio of natural gas-fired generating assets to LS Power for $1.05 billion. This sale is expected to be accretive to earnings per share beyond 2011.
NextEra Energy maintained its earnings per share guidance for 2011 of $4.35–$4.65. The Zacks Consensus Estimates for third-quarter 2011, fiscal year 2011 and fiscal year 2012 are currently $1.49 per share, $4.50 per share and $4.74 per share, respectively.
NextEra Energy retains a Zacks #3 Rank, which translates into a short-term Hold rating. The company also has to compete with Progress Energy Inc. (PGN) and Southern Company (SO).
Based in Juno Beach, Florida, NextEra Energy Inc. engages in the generation, transmission, distribution and sale of electric energy in Florida.
NEXTERA ENERGY (NEE): Free Stock Analysis Report
PROGRESS ENERGY (PGN): Free Stock Analysis Report
SOUTHN COMPANY (SO): Free Stock Analysis Report
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