What to Expect From NextEra Energy and Its Peers in Q2

NextEra Energy (NEE) will likely report its second-quarter earnings on July 24. Based on analysts’ estimates, the utility is expected to report an EPS of $2.28 for the quarter ended June 30. In the same quarter last year, the company reported an EPS of $2.11.

NextEra Energy has been growing faster than its peers for several quarters. The growth was driven by Florida Power & Light and NextEra Energy Resources. NextEra Energy’s strong earnings growth fueled its stock. In the past 12 months, NextEra Energy stock has risen almost 23%, while broader utilities (XLU) have rise 16%. Southern Company (SO) and Duke Energy (DUK) have risen 17% and 10%, respectively, during this period.

What to Expect From NextEra Energy and Its Peers in Q2

NextEra Energy’s earnings drivers

According to the consensus estimates, NextEra Energy will report total revenues of $4.62 billion in the second quarter. The estimates indicate a top-line growth of more than 12% YoY (year-over-year). Weather and customer base growth drive the utility’s top line. Florida’s superior economic growth helped boost customer growth, which ultimately supported the company’s revenues.

In 2018, NextEra Energy was the biggest power generator from wind and solar globally. The company’s renewables and storage portfolio is 18 GW (gigawatts). The portfolio is expected to grow to more than 30 GW by 2022. The company plans to invest approximately $13 billion per year in capital projects through 2022.

In the first quarter, NextEra Energy posted an EPS of $2.20—an increase of 12% YoY. The company is one of the fastest-growing utilities in the country. The company’s earnings have grown around 8% compounded annually in the last decade. In contrast, broader utilities have grown approximately 4%.

The company has given an earnings guidance range of $8.00–$8.50 per share for 2019. The guidance indicates a rise of approximately 7% compared to 2018. In comparison, utilities (XLU) at large are aiming for annual earnings growth of 4%–6% for the next few years.

Leverage

Along with superior earnings growth, NextEra Energy looks financially sound compared to its peers. At the end of the first quarter, the company had a net debt of $39.2 billion. The net debt-to-EBITDA ratio was 4.4x. The ratio was lower than Southern Company’s ratio of 5.2x and Duke Energy’s ratio of 5.8x. The ratio represents how many years it would take a company to repay debt keeping the EBITDA and debt constant.

Southern Company will likely report its second-quarter earnings on July 31. Duke Energy is expected to report its earnings on August 6.