BMO Capital Markets maintained its positive stance on NextEra Energy (NYSE:NEE), raising the price target to $91 from the previous $83 while keeping an Outperform rating on the stock. The upward revision reflects an anticipated increase in earnings for the third quarter of 2024 (3Q24), with estimates now set at $0.99 compared to $0.94 in the third quarter of 2023 (3Q23).
The approximately 5% year-over-year earnings growth is primarily attributed to profits from NextEra Energy Resources (NEER), which are expected to benefit from over 1 gigawatt (GW) of new investments and more normal wind resource conditions. However, this increase is slightly tempered by a projected decrease in contributions from the company's gas infrastructure operations.
At Florida Power & Light (FPL), the company's regulated utility arm, growth in regulatory capital is anticipated to be partially balanced by higher interest expenses. Analysts predict that investors will be particularly attentive to NEER's net backlog additions, initial estimates of FPL's storm-related costs, and revised perspectives on the potential impacts of the November election results.
The decision to raise the price target to $91 is also based on a mark-to-market assessment of peer-group multiples, indicating a reassessment of NextEra Energy's value relative to comparable companies in the sector. The Outperform rating suggests that BMO Capital Markets expects the stock to perform better than the overall market or its sector in the foreseeable future.
NextEra Energy reported a significant increase in earnings per share (EPS) for the second quarter of 2024, exceeding 9% from the previous year. The company's subsidiary, Florida Power & Light Company, also issued $350 million in First Mortgage Bonds as part of its strategic capital-raising efforts. Jefferies recently initiated coverage on NextEra Energy with a Hold rating, citing the company's prime position to benefit from the growing demand for renewable energy sources.
NextEra Energy was also included in the Public Utility Commission of Texas's shortlist of 17 gas-fired power plant projects for potential funding from the Texas Energy Fund. This development aims to bolster the state's power grid and promote the development of natural gas electricity generation facilities.
NextEra Energy is set to benefit from a surge in demand from data centers, securing several supply contracts in the second quarter. The company's EPS forecast for 2024 remains unchanged, with projections ranging between $3.23 and $3.43 per share, following a recent quarterly review by BMO Capital Markets. Lastly, NextEra Energy expanded its Board of Directors with the appointment of Geoffrey S. Martha, the Chairman and CEO of Medtronic (NYSE:MDT) plc.
InvestingPro Insights
NextEra Energy's strong market position and financial performance are further highlighted by recent InvestingPro data. The company boasts a substantial market capitalization of $172.2 billion, underscoring its significance in the utility sector. With a P/E ratio of 27.25, NEE trades at a premium compared to many utility peers, potentially reflecting investor confidence in its growth prospects.
InvestingPro Tips reveal that NextEra Energy has raised its dividend for 28 consecutive years, demonstrating a commitment to shareholder returns that aligns with BMO Capital Markets' positive outlook. This consistent dividend growth, coupled with a current dividend yield of 2.46%, may appeal to income-focused investors. Additionally, the company's strong return over the last year, with a one-year price total return of 62.17%, supports BMO's decision to maintain an Outperform rating.
The company's robust financial health is further evidenced by its profitability over the last twelve months and analysts' predictions of continued profitability this year. These factors, along with NextEra's trading near its 52-week high (97.31% of the 52-week high price), align with BMO's increased price target and positive growth expectations for 3Q24.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for NextEra Energy, providing deeper insights into the company's financial position and market performance.
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