On Monday, BMO Capital Markets adjusted its outlook on NextEra Energy (NYSE:NEE) Partners (NYSE:NEP), reducing the stock's price target to $28 from the previous $32 while maintaining an Outperform rating. The adjustment follows the firm's updated second-quarter 2024 EBITDA (earnings before interest, taxes, depreciation, and amortization) and CAFD (cash available for distribution) projections for the company.
The new estimates are set at $517 million for EBITDA and $225 million for CAFD. These figures represent a 6% increase from the second quarter of 2023, which saw EBITDA at $486 million and CAFD at $200 million.
The revision in estimates and the subsequent price target change are attributed to several factors. The increase in EBITDA and CAFD is primarily driven by more normalized wind conditions and the recent completion of a significant acquisition—a 690MW wind/solar portfolio—in April 2023. However, the sale of the STX pipeline has partially offset these gains.
During the upcoming call, the focus is expected to be on NextEra Energy Partners' efforts to find a viable financing solution for the 2026-2032 CEPF (Corporate Environmental and Social Responsibility) maturities.
This solution is crucial for supporting the company's dividend outlook. BMO's revised SOTP (sum of the parts) target of $28 reflects a higher discount rate, which has been factored into the new price target.
NextEra Energy Partners' updated financial estimates and the new price target from BMO Capital Markets offer a glimpse into the company's performance expectations and strategic financial management in the medium term.
In other recent news, NextEra Energy Partners experienced significant developments. RBC Capital downgraded the company's stock from Outperform to Sector Perform due to concerns about the company's future growth prospects and potential financial challenges.
The firm also adjusted the price target for NextEra Energy Partners to $30.00, a decrease from the previous target of $38.00.
In parallel, JPMorgan also downgraded NextEra Energy Partners from Neutral to Underweight while maintaining a price target of $25.00. This adjustment was due to concerns about the company's position in the current energy market and potential risks associated with its longer-term Corporate Equity Participation Funding obligations.
On the brighter side, NextEra Energy reported a robust first quarter with an 8.3% increase in adjusted earnings per share compared to the previous year. This growth is attributed to significant expansions in solar capacity and storage projects.
The company's outlook remains positive with plans to significantly increase its solar mix and capitalize on the growing demand for renewable energy in the United States. These are the recent developments for NextEra Energy Partners.
InvestingPro Insights
NextEra Energy Partners (NYSE:NEP) has been a topic of interest for investors, especially considering BMO Capital Markets' recent price target adjustment. To complement the analysis, here are some insights based on real-time data from InvestingPro. With a market capitalization of $2.5 billion, NEP is trading at a low Price/Book multiple of 0.7 as of the last twelve months leading up to Q1 2024, indicating potential undervaluation relative to its assets. Additionally, the company boasts a significant dividend yield of 13.36%, a testament to its commitment to returning value to shareholders, as evidenced by its 10-year streak of raising dividends.
InvestingPro Tips highlight that NEP's net income is expected to grow this year, which aligns with the positive outlook on EBITDA and CAFD growth projected by BMO Capital Markets. Moreover, with liquid assets exceeding short-term obligations, the company demonstrates a solid liquidity position. However, it's worth noting that NEP has not been profitable over the last twelve months, which investors should consider in the context of its future profitability predictions. For those interested in a deeper dive into NEP's financial health and future prospects, InvestingPro offers additional tips. Using coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
For a complete analysis and access to over nine additional InvestingPro Tips, which could further inform investment decisions, investors are encouraged to visit https://www.investing.com/pro/NEP. These tips provide valuable guidance on the company's ability to make interest payments on debt, its trading multiples, and the analysts' profitability predictions for the current year.
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