The Investors Who Say NEE!

As earnings season continues, investors are on the lookout for stocks that are proving their worth. A company that crushes analyst expectations and places itself at the top of its sector is particularly interesting, especially when that company is the only growth stock in a sector full of income investments. That lone rebel is named NextEra Energy (NYSE: NEE  ) .

In brightest day and darkest night 
NextEra has two main components; Florida Power & Light and NextEra Energy Resources. NextEra provides electricity to 24 states and Canada through several power plants, including five nuclear reactors and several solar energy centers. FPL is the largest utility provider in Florida, while NER has numerous wind-powered electricity centers all over North America and is building four new solar projects (three in the Mohave and one in Spain) to add to its already sizable collection. All of this makes NextEra the "largest generator in the US of renewable energy from the wind and sun." 

Clear skies ahead
While it's excellent that NextEra is focused on the future of utilities in renewable energy, does that make it a good investment? According to the company's earnings report from July 26, it certainly does. In the second quarter of 2012, NextEra earned $1.45 per share (up from $1.38 in Q2 2011), absolutely blowing away the average EPS estimate of $1.16. Adjusted earnings came in at $1.26 per share, compared to $1.18 in 2011.

Meanwhile, net income was $607 million, up $27 million from last year. However, operating revenue fell to $3.67 billion, a drop of 7.4%. Investors seem to be regarding this as a small bump in the road for NextEra, considering the stock was up more than 2% after the announcement. The new CEO James Robo seems confident that NextEra will maintain its growth and continue its record of outperformance.

Sunshine on a cloudy day
While this confidence may be valid, investors should be wary of the operating revenue loss. Gas prices have been at record lows, which cut NextEra's production costs, and yet the company still lost money. With this in mind, let's see how NextEra stacks up against its competitors.

Company

P/E

Dividend Yield

Payout Ratio

Net Margin

NextEra 13.6 3.5% 45% 14%
Southern Co (NYSE: SO  ) 19.1 4.2% 77% 13%
TECO Energy (NYSE: TE  ) 14.1 5% 69% 8%
Exelon (NYSE: EXC  ) 12.9 3.9% 74% 11%
Duke Energy (NYSE: DUK  ) 19.4 4.7% 89% 10%

NextEra has the lowest yield and payout ratio of the bunch, which means it probably isn't a great income investment. However, that small payout ratio may be due to the company's focus on expansion and its commitment to reinvesting in the business. That, combined with NextEra's healthy margin and cheap price tag, make it an excellent choice for growth investors.

NextEra isn't just a sound investment now, it's also got high expectations for the future. The company's full-year EPS guidance is $4.35-$4.65, and it expects EPS to be $5.05-$5.65 for the full year of 2014. This will shrink the gap between NextEra and its competitors, but it's far enough below the industry average of 60 that the company will still be able to fund further growth.

The sun will come out tomorrow
Q2 was pretty kind to NextEra, and the company expects good things on the horizon. With the company's financial strength and focus on sustainability, this outlook is warranted. If you want to take a closer look at NextEra and what's in store for the company going forward, check out this article from fellow Fool Sean Williams.

NextEra looks good right now, but it's not the only great energy stock out there. After exhaustive research and years of toil, our analysts have found the greatest energy stock we've ever seen. Out of the goodness of our hearts, we're ready to give it to you free in our special report: The Only Energy Stock You'll Ever Need.

Motley Fool contributor Mark Reeth loves a growth company in an income investment sector like utilities. He's just a rebel like that. Follow him and all his rebellious exploits @ChristmasReeth.

Motley Fool newsletter services have recommended buying shares of Exelon and Southern, and have recommended creating a write covered straddle position in Exelon. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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