A consistent focus on renewables and the expansion of the regulated segment are likely to be the key factors driving NextEra Energy’s (NEE) growth in the next couple of years. Its management has already forecast an accelerated earnings growth rate of 6%–8% through 2018.
NextEra has a capital spending plan of $15 billion for the next four years. It will be interesting to see its performance with the expected rising interest rates. The table above displays the price targets and recommendations of NextEra Energy given by Wall Street analysts for the next one year.
According to the analysts’ consensus, NextEra Energy is going to offer better returns to its investors. It has an estimated upside of 13% with a median price target of $119 in the next one year. It’s currently trading at $105.2. Of the 25 analysts tracking NextEra, five analysts are recommending a “Hold” while 20 analysts are recommending a “Buy.” None of the analysts have a “Sell” recommendation for NEE as of January 18, 2016.
Southern Company (SO) has a price target of $47.2, amounting to a possible upside of a mere 1.3% against its current market price of $46.6. Duke Energy (DUK) has an estimated upside of ~6% in one year according to analyst estimates. It has a price target of $75.9 against its current market price of $71.8.
NextEra Energy’s outlook
NextEra expects its earnings growth to accelerate to 6%–8% in the next couple of years. According to its management guidance, the 2018 earnings are expected to range between $6.60–$7.10 per share. NextEra Energy Partners (NEP), a yieldco[1. A dividend growth-oriented public company] of NEE, more than doubled its renewables portfolio size since its IPO (initial public offering) in 2014. The management expects its adjusted EBITDA[2. Earnings before interest, tax, depreciation, and amortization] to double from its IPO levels and cross the mark of $500 million. NEP’s financials are consolidated with NextEra Energy Resources.
NextEra is making robust investments in developing batteries for power storage. While this is still in its infancy, it has the potential to be a game-changer for the whole renewable energy (PBW)(TAN) industry. With a heavy capital expenditure plan and a rising interest rate environment, it will be interesting to see whether NextEra Energy sustains its growth momentum.