Stock Pitch Report: NextEra Energy
Company Overview:
NextEra Energy, Inc. (NYSE: NEE) is a leading clean energy company headquartered in
Juno Beach, Florida. NextEra Energy owns Florida Power & Light Company, which is
America’s largest electric utility that sells more power than any other utility, providing
clean, affordable, reliable electricity to approximately 5.8 million customer accounts, or
more than 12 million people across Florida. NextEra Energy also owns a competitive
clean energy business, NextEra Energy Resources, LLC, which, together with its
affiliated entities, is the world’s largest generator of renewable energy from the wind and
sun and a world leader in battery storage. Through its subsidiaries, NextEra Energy
generates clean, emissions-free electricity from seven commercial nuclear power units
in Florida, New Hampshire and Wisconsin. NextEra is the largest electric utility in the
country and a world leader in producing wind energy and solar power. It currently has
63 gigawatts (GW) of power-generation assets in operation, the bulk of which produce
lower carbon energy. However, that's a fraction of the opportunity it sees ahead as the
U.S. decarbonizes by building out additional renewables and storage capacity:
NextEra Energy has been recognized often by third parties for its efforts in sustainability,
corporate responsibility, ethics and compliance, and diversity. NextEra Energy is ranked
No. 1 in the electric and gas utilities industry on Fortune’s 2022 list of “World’s Most
Admired Companies,” recognized on Fortune’s 2021 list of companies that “Change the
World” and received the S&P Global Platts 2020 Energy Transition Award for leadership
in environmental, social and governance
Investment Thesis:
NextEra Energy expects to deploy $85 billion to $95 billion of capital through 2025 to
capitalize on the decarbonizing opportunity by growing its operations. It has already
secured an industry-leading 20 GW of renewable-energy development projects in its
energy resources segment that it expects to build out over the next few years. It also
expects to invest heavily in transmission and distribution projects, renewable natural
gas, hydrogen, and building out a national water utility.
These investments have NextEra Energy on track to grow its adjusted earnings per
share by a roughly 10% annual rate through 2025 at the high end of its guidance range.
Meanwhile, it expects operating cash flow to grow at or above that level. This forecast
supports the company's view that it can grow its dividend by around a 10% annual rate
through at least 2024.
The company expects to continue growing rapidly for the next few decades. Driving that
growth is its real zero strategy, which it unveiled earlier this year. That plan will eliminate
carbon emissions from its operations by 2045, while also helping decarbonize the U.S.
power sector and economy.
The company's Florida utility expects to deploy hundreds of millions of solar panels,
growing its capacity from 4 GW to 90 GW. It also plans to expand its energy-storage
capacity from 500 megawatts to 50 GW and replace natural gas at its power plants with
renewable natural gas and green hydrogen.
Meanwhile, its energy resource business expects to continue building out
renewable-energy capacity, transmission lines, and other infrastructure to decarbonize
the power sector and economy. These investments should enable NextEra to continue
growing its earnings and dividends at attractive rates in the coming years
NextEra Energy has plugged into the decarbonization megatrend. It has powered
above-average growth over the last several years, which seems likely to continue.
Because of that, NextEra is a stock that should be kept in your portfolio for clean energy
stock and will increase at a good steady rate over the years.
Industry Analysis:
● The global renewable energy market was valued at $881.7billion in 2020, and is
projected to reach $1,977.6 billion by 2030,which is a 124.3% growth rate and is
growing at a CAGR of 8.4% from 2021 to 2030.
● Annual renewable capacity additions broke a new record in 2021, increasing 6%
to almost 295 GW, despite the continuation of pandemic-driven supply chain
challenges, construction delays and record-level commodity prices for raw
materials
● Solar PV and wind costs are expected to remain higher in 2022 and 2023 than
pre-pandemic levels due to elevated commodity and freight prices. However,
their competitiveness actually improves, due to much sharper increases in
natural gas and coal prices.
● Renewable capacity is expected to further increase over 8% in 2022, reaching
almost 320 GW. However, unless new policies are implemented rapidly, growth
remains stable in 2023 because solar PV expansion cannot fully compensate for
lower hydropower and steady year-on-year wind additions
● Globally, forecast additions for 2022 and 2023 have been revised upwards by 8%
from December last year, thanks to strong policy support in the People’s Republic
of China (hereafter, “China”), the European Union and Latin America, and despite
downward forecast revisions in the United States
● While looming market uncertainties increase challenges, the new focus on
energy security – especially in the European Union – is also triggering an
unprecedented policy momentum towards accelerating energy efficiency and
renewables. Ultimately, the forecast of renewable markets for 2023 and beyond
will depend on whether new and stronger policies will be introduced and
implemented in the next six months
Financial Overview:
NextEra Energy, Inc is trading at $81.82 (as of 01/21/23). The Market Cap of the
company is $162.6B and it has an average volume of 5.62M. The Dividend yield of the
company is 2.08% which is higher than industry average. The P/E ratio stands at 42.25
and their quarterly revenue has been on an upward trend (ignoring Mar 2022 quarterly)
since 2020. Their annual EPS for 2021 and 2022 continues to be in the range of
$2.8-$2.9. For 2023 and 2024, NextEra Energy expects their adjusted EPS to be in the
range of $2.98 to $3.13 and $3.23 to $3.14 making that a 7.96% projected growth. The
company has a debt of $66.72B and its funds from operations to debt ratio has been
decreasing from 24.4% in 2020 to 21% in 2022.
Market Positioning and competitors:
In terms of market positioning, Nextera Energy is well-positioned to benefit from the
growing trend towards renewable energy sources. The company's significant exposure
to wind and solar energy, along with its diverse portfolio of power generation assets,
positions it well to benefit from this trend. Additionally, the company's focus on clean
energy, as well as its strong financial position, has helped it to establish a strong
reputation in the industry.
In terms of competitors, some of the major players in the electric power generation
industry include:
● Duke Energy Corporation (DUK): Duke Energy is a leading electric power
company that operates in the United States and Latin America. The company
operates a diverse portfolio of power generation assets, including coal, natural
gas, nuclear, and hydroelectric power plants.
● American Electric Power Company Inc. (AEP): American Electric Power is a
leading electric power company that operates in the United States. The company
operates a diverse portfolio of power generation assets, including coal, natural
gas, and hydroelectric power plants.
● Berkshire Hathaway Energy (BRK.A): Berkshire Hathaway Energy is a subsidiary
of Berkshire Hathaway Inc., and is involved in the electric power generation and
distribution industry. The company operates a diverse portfolio of power
generation assets, including wind, solar, natural gas, and hydroelectric power
plants.
It's important to note that the electric power generation industry is highly competitive
and the list of competitors can change over time. Additionally, the market positioning
and competitiveness of a company can be affected by many factors and is subject to
change.
