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NextEra's ROE Better Than Industry at 11.75X: How to Play the Stock?
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NextEra Energy’s (NEE - Free Report) trailing 12-month return on equity is 11.75%, ahead of the industry average of 10.42%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds in its operations to generate income.
NextEra Energy continues to benefit from improving economic conditions in Florida and rising demand for clean energy.
NextEra Energy has outperformed its industry, sector and the S&P 500 in the year-to-date period.
The stock is presently trading above 50 days simple moving average (SMA) and 200 days SMA, indicating a bullish trend.
Image Source: Zacks Investment Research
Factors Acting as Tailwinds for NextEra Energy
NextEra Energy is a premier U.S. utility service provider, offering efficient power and energy services across various states. Nearly 89% of its customers were residential and 11% were commercial. The improvement in the Florida economy is going to revive demand from commercial customers and drive its performance.
NextEra’s unit Florida Power & Light Company (“FPL”), including Gulf Power, has plans to invest $43.8 billion in the 2024-2028 time period. FPL's focus is on clean, efficient, modernized generation and a stronger and smarter grid. The reduction in interest rates and expected further decline in rates will assist the company as it lowers the capital financing expenses of the company.
The demand for clean energy is rising. To address the increasing demand, NextEra’s unit, NextEra Energy Resources, continues to work on its strategy of making a long-term investment in clean energy assets. The company expects to be able to add 36.5-46.5 gigawatts (GW) of new renewables in the 2024-2027 time frame to the generation portfolio via clean energy investments.
NextEra Energy has been managing debt effectively and has top-tier credit ratings, ranging from A to Baa1, from all major rating agencies. Debt to capital of the company is 53.54% lower than its industry average of 54.87%.
NextEra Energy’s Earnings Estimates Move North
NextEra Energy reiterated its 2024 earnings per share in the range of $3.23-$3.43 compared with $3.17 a year ago. The Zacks Consensus Estimate for NEE’s 2024 earnings per share indicates a 0.3% increase in the last 60-day period.
Image Source: Zacks Investment Research
The Zacks Earnings Estimate for 2024 and 2025 earnings of another utility, Duke Energy Corporation (DUK - Free Report) , remained unchanged in the last 60 days.
NextEra Energy’s ROE and ROA Are Better Than the Industry
Return on Equity (ROE) and Return on (ROA) both show a company's ability to generate earnings from its investments. NextEra Energy’s ROE and ROA are both better than the industry in the trailing twelve months.
ROE measures how effectively the company’s management is utilizing investors’ money to generate returns.
Image Source: Zacks Investment Research
ROA shows how much profit a company earns from its assets.
Image Source: Zacks Investment Research
NextEra’s Stock Trading at a Premium
The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis.
Image Source: Zacks Investment Research
To Sum Up
Improving economic conditions and a rising customer base in Florida continue to create demand and boost the performance of the company. NextEra Energy is poised to meet the rising demand for clean electricity.
Given the improvement in earnings estimates, return on equity, strong price performance, and return on asset, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility. NEE is trading at a premium. It is better to wait for a while and look for a better entry point.
Image: Bigstock
NextEra's ROE Better Than Industry at 11.75X: How to Play the Stock?
NextEra Energy’s (NEE - Free Report) trailing 12-month return on equity is 11.75%, ahead of the industry average of 10.42%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds in its operations to generate income.
NextEra Energy continues to benefit from improving economic conditions in Florida and rising demand for clean energy.
NextEra Energy has outperformed its industry, sector and the S&P 500 in the year-to-date period.
NextEra’s Shares Outperform Industry, Sector & S&P
Image Source: Zacks Investment Research
The stock is presently trading above 50 days simple moving average (SMA) and 200 days SMA, indicating a bullish trend.
Image Source: Zacks Investment Research
Factors Acting as Tailwinds for NextEra Energy
NextEra Energy is a premier U.S. utility service provider, offering efficient power and energy services across various states. Nearly 89% of its customers were residential and 11% were commercial. The improvement in the Florida economy is going to revive demand from commercial customers and drive its performance.
NextEra’s unit Florida Power & Light Company (“FPL”), including Gulf Power, has plans to invest $43.8 billion in the 2024-2028 time period. FPL's focus is on clean, efficient, modernized generation and a stronger and smarter grid. The reduction in interest rates and expected further decline in rates will assist the company as it lowers the capital financing expenses of the company.
The demand for clean energy is rising. To address the increasing demand, NextEra’s unit, NextEra Energy Resources, continues to work on its strategy of making a long-term investment in clean energy assets. The company expects to be able to add 36.5-46.5 gigawatts (GW) of new renewables in the 2024-2027 time frame to the generation portfolio via clean energy investments.
NextEra Energy has been managing debt effectively and has top-tier credit ratings, ranging from A to Baa1, from all major rating agencies. Debt to capital of the company is 53.54% lower than its industry average of 54.87%.
NextEra Energy’s Earnings Estimates Move North
NextEra Energy reiterated its 2024 earnings per share in the range of $3.23-$3.43 compared with $3.17 a year ago. The Zacks Consensus Estimate for NEE’s 2024 earnings per share indicates a 0.3% increase in the last 60-day period.
Image Source: Zacks Investment Research
The Zacks Earnings Estimate for 2024 and 2025 earnings of another utility, Duke Energy Corporation (DUK - Free Report) , remained unchanged in the last 60 days.
NextEra Energy’s ROE and ROA Are Better Than the Industry
Return on Equity (ROE) and Return on (ROA) both show a company's ability to generate earnings from its investments. NextEra Energy’s ROE and ROA are both better than the industry in the trailing twelve months.
ROE measures how effectively the company’s management is utilizing investors’ money to generate returns.
Image Source: Zacks Investment Research
ROA shows how much profit a company earns from its assets.
Image Source: Zacks Investment Research
NextEra’s Stock Trading at a Premium
The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis.
Image Source: Zacks Investment Research
To Sum Up
Improving economic conditions and a rising customer base in Florida continue to create demand and boost the performance of the company. NextEra Energy is poised to meet the rising demand for clean electricity.
Given the improvement in earnings estimates, return on equity, strong price performance, and return on asset, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility. NEE is trading at a premium. It is better to wait for a while and look for a better entry point.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.