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NextEra Energy shares on uptrend ahead of earnings

NextEra Energy is making a big commitment to net zero, with plans to reduce its scope 1 and 2 emissions to zero and acquire a flurry of wind farm projects. The US energy company is banking on a shift to renewables, but investors may question this move, coming at a time when green energy tariffs and tax breaks are looking uncertain.

Ahead of its second quarter earnings announcement on 27 June, the NextEra Energy [NEE] shares price has been in an uptrend. The stock has gained 3.1% since the start of the month (through 24 June).

Boosting sentiment was when the energy firm raised its earnings per share forecasts by $0.05 for 2022 and 2023, to $2.80–$2.90 and $2.98–$3.13, respectively, on 14 June. The company’s share price rose by 3.8% in the day following the announcement.

Overall, the company’s share price is down 15.5% so far this year, far outperforming the Nasdaq’s 25.8% drop in the same period.

Also, NextEra unveiled its decarbonisation strategy this month, which aims to eliminate all scope 1 and 2 emissions (the direct and indirect emissions that result from its operations) by 2045. It has also made the ambitious commitment to do this without resorting to carbon offsets.

It has called this its “Real Zero” goal, although success will depend on its activities being “supported by … constructive governmental policies and incentives”.

How has NextEra Energy been performing?

The last time NextEra shared its financial results on 21 April, it reported a net loss of $451m, compared to the $1.6bn profit it made a year before. It said the reason for this 127% downward swing was because of hedges it had placed on natural gas prices, which had surged during the period.

Its clean energy unit produced a deep $1.5bn loss in Q1, compared to profits of $491m in the year-ago quarter.

It also delivered the news that it expects 2.8 gigawatts of solar and store projects will be delayed by 12 months or more as a result of the US Department of Commerce’s probe into solar panel imports.

In May, Rystad Energy estimated that 17.5 gigawatts of planned solar installations were likely to be disrupted in 2022. However, the industry was given some reprieve in June when President Joe Biden announced that tariffs would be lifted on solar panels being imported from Cambodia, Malaysia, Thailand and Vietnam for the next two years.

NextEra’s share price fell 6% following its Q1 results.

What’s expected for NextEra’s Q2 results?

Investors will be keen to hear what the change in solar tariff rules means for NextEra and its renewable energy subsidiary NextEra Energy Resources.

The company has been doubling down on the shift towards green energy, and in October revealed plans to build a 500 megawatt wind project that will provide power for a hydrogen fuel cell company. It also acquired a 100 megawatt wind project for $280m, and plans to keep expanding its portfolio in this area.

Investors will want to hear about how these plans have been affected by the uncertainty surrounding Biden’s flagship Build Back Better bill, which would provide tax incentives for green energy firms and customers, which appears to have lost support in the Senate.

There may also be more clarity on NextEra’s move into wastewater management. Earlier this month, it was revealed that the electricity firm had entered into a contract to purchase the wastewater system of a town in Montgomery County, Pennsylvania.

Analysts at Zacks Investment Management are expecting NextEra to announce a 44.5% year-on-year jump in sales of $5.67bn, while earnings per share is expected to come in at $0.75, a 5.6% year-on-year increase.

Analysts have mixed expectations for what lies ahead for NextEra. On 13 June, BMO Capital Markets lowered its price target from $105 to $93, while Credit Suisse more recently issued a $76 price target. According to MarketBeat, the consensus price target among analysts currently sits at $88.86, representing a potential 15.7% upside. Six analysts recommend the stock as a ‘buy’, while two have ‘hold’ ratings.


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