NextEra Energy Stock Forecast: The data is in and the results are clear: consumers want renewable energy options. Demand has never been higher, in part because of the cost savings associated with transitioning to fossil fuel alternatives.
The renewable energy industry is responding to this demand with increasingly sophisticated solutions, and opportunities to integrate solar and wind power are less expensive and more efficient than ever before.
NextEra Energy is a leader in this space, offering innovative energy solutions that are popular in residential, commercial, and industrial settings.
The Rise of Renewables
Companies focused on innovation in renewable energy are collaborating to create next generation products, and they are working together to influence public sentiment and encourage a favorable regulatory environment.
The European Union is rapidly adopting these technologies, and it is well on its way to achieving a goal of becoming the first carbon-neutral continent.
The United States is following along more slowly – but it is making the change as well.
April 2019 marked the first-ever month in which renewable energy overtook coal.
In that month, renewables delivered 23 percent of US power, while coal was responsible for just 20 percent. This is due, in part, to a clean energy commitment at the state level.
Fifteen of the 50 states, along with Puerto Rico and Washington, DC, have defined goals of reducing their reliance on traditional fuel sources to under 50 percent of total consumption. Target dates for these changes range from 2030 to 2050. Collectively, these states are responsible for approximately 28 percent of the total US demand for electricity.
Despite some challenges, all indications are that the trend towards renewables in the US will continue. The pace will be determined by a variety of factors, including the results of the 2020 election.
Today, more than half of renewable energy comes from wind and solar sources – a change for the market that was once dominated by hydro-electric power.
Companies like NextEra Energy are driving this transition. Investors are rapidly adding renewable energy shares to their portfolios in an effort to mitigate the risk of declining profits in the traditional energy sector. The big question is whether NextEra Energy stock is a buy.
NextEra Energy: The Global Leader in Solar & Wind
NextEra Energy [NYSE: NEE] is the world’s top producer of solar and wind power with a market cap near $100 billion. It owns a variety of subsidiaries that deliver renewable solutions worldwide.
The company is headquartered in the state of Florida, where it owns two electricity providers. Florida Power & LightCompany serves in excess of five million customers, and owns 27,440 megawatts of generation capacity.
Gulf Power Company has a client roster topping 460,000 customers and owns 2,301 megawatts of generation capacity.
In addition to these businesses, NextEra Energy owns the subsidiary NextEenergy Resources, LLC. This is the part of the organization that is responsible for global leadership in solar and wind generation, and it is a strong competitor in battery storage solutions.
Most recently, Forbes included NextEra on the World’s Most Admired Companies List, ranking it number one among its electric and gas utilities peers for the 13th time in 14 years.
It also made the list of top 10 global organizations for social responsibility and use of corporate assets and the top 20 list for quality of management, people management, and overall innovation.
These accolades are important in weighing a decision to invest, as they demonstrate the organization’s commitment to excellence on all fronts. But is that enough to consider NextEra stock a buy?
Is NextEra Energy a Buy?
What is the NEE stock forecast? NextEra Energy announced its fourth quarter 2019 and full-year financial results in January 2020, prompting a gain in share value.
For the fourth quarter, adjusted earnings per share came in at $1.44, which is a year-over-year decrease from 2018’s $1.49 per share. On a GAAP basis, earnings were up 126.1 percent year-over-year, totaling $1.99 per share as compared to $0.88 per share in the fourth quarter of 2018.
Revenues totaled $4.588 million, which is an increase of 4.5 percent year-over-year. In 2019, NextEra Energy shares gained 43 percent in value.
Some investors indicated concerns that this pace isn’t sustainable, but from an analyst perspective, there is still plenty of room to add value for shareholders.
During the earnings call, management shared a strong long-term earnings growth outlook. Current guidance includes expected earnings growth at a compound annual rate of 6 percent to 8 percent per year in 2020 and 2021.
For 2022, NextEra projects adjusted earnings per share of $10 – $10.75. Much of this growth will depend on achieving expansion goals, which include the addition of 11,500 – 18,500 megawatts of new renewable power projects by the end of 2022.
What are the Risks of Buying NextEra Energy?
The biggest risks for NextEra Energy [NYSE: NEE] – and renewables in general – come from changes in trade and tariff policies. If new tariffs are imposed, the cost of renewables may rise, which has the potential to stifle growth.
An additional concern is the expiration of certain tax credits that have encouraged the transition to renewables. The Production Tax Credit (PTC) that prompted investment in wind energy is set to expire in 2020, and the Investment Tax Credit (ITC) that has been a key driver of solar energy growth will begin stepping down in 2020.
There is a possibility that ITC will be expanded to include wind projects, and the entire credit may be extended if relevant legislation passes in future budgets. It was not extended or expanded in the budget passed through Congress in December 2019 as industry advocates had hoped.
NextEra Energy Stock Forecast Summary
Despite the challenges restraining renewable growth on some fronts, it is clear that this industry is set to expand, both in the short-term and the long-term.
Obstacles in the form of tariffs and similar may slow the pace of growth, but it certainly won’t halt it. NextEra Energy’s position as an industry leader makes it a smart choice for investors, particularly those with long-term goals. The bottom line is that NextEra Energy stock is a buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.