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NextEra Energy's Earnings Hold Up Well Despite COVID-19

By Matthew DiLallo - Apr 22, 2020 at 10:45AM

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The utility still expects to deliver on its ambitious long-term earnings growth forecast.

The COVID-19 pandemic is disrupting much of the U.S. economy. The trickle-down effect is impacting almost every aspect, including demand for energy and the ability of companies to get financing. Even utilities aren't immune from this impact.

NextEra Energy (NEE 1.16%), however, is weathering this storm better than most. That was quite evident in the utility's first-quarter results and outlook for the balance of the year.

A closer look at NextEra Energy's first-quarter earnings

Metric

Q1 2020

Q1 2019

Change

Adjusted earnings

$1.17 billion

$1.06 billion

10.4%

Adjusted earnings per share

$2.38

$2.20

8.2%

Data source: NextEra Energy.

NextEra Energy generated solid earnings growth in what was a turbulent period for the U.S. economy. Earnings rose 8% on a per-share basis, thanks to healthy growth across all three of its business units:

NextEra Energy's earnings by segment in the first quarter of 2020 and 2019.

Data source: NextEra Energy. Chart by the author.

Earnings at Florida Power & Light Company (FP&L) rose by 9%, powered mainly by new investments completed over the past year, including $1.4 billion of capital spending during the first quarter. These investments enabled the company to add 72,000 new customers over the past year.

Earnings at Gulf Power, meanwhile, increased by about 8%, thanks to a combination of new investments and expense reductions as part of its merger-integration plan. NextEra is investing heavily to modernize Gulf Power's generation portfolio, which includes recently completing the Blue Indigo Solar Center and progressing the conversion of Plant Crist from coal to natural gas. These moves will not only clean up its emissions, but also reduce costs.

Finally, the energy-resources segment grew earnings by 13%. This business benefited from not only new investments, but also from the strong performance of its legacy assets. The company also made excellent progress with its renewable energy expansion efforts during the quarter. It added 1,590 megawatts (MW) of new projects to its backlog since January, including 458 million MW of battery storage.

That has it on pace to invest $1 billion on battery-storage projects next year, which is the largest ever by a power company. NextEra also noted that it's not experiencing any construction or supply-related issues due to COVID-19. Because of that, it remains on track to complete all its planned renewable-energy projects this year.

Solar panels with a bright sun in the background.

Image source: Getty Images.

What's ahead for NextEra Energy?

NextEra's solid start to 2020 has it well on pace to deliver on its full-year forecast. Thus, it continues to believe its adjusted earnings will be in the range of $8.70 to $9.20 per share, which includes $0.15 per share of accretion from its acquisition of Gulf Power. 

The company also remains on track with its long-term outlook. That forecast would see earnings grow by around a 6% to 8% annual rate through 2022, putting its adjusted earnings that year in the range of $10.00 to $10.75 per share.

CEO James Robo, however, went a step further about the company's outlook. He stated, "[D]espite the current market challenges... I will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted earnings per share expectations ranges in 2020, 2021, and 2022."

Given that reaffirmed outlook, NextEra also remains on track with its dividend-growth strategy. That outlook would see it grow its payout by about 10% per year through at least 2022.

A top-tier utility for the long haul

The COVID-19 pandemic has had a limited impact on NextEra's operations and financial results. Because of that, the company firmly believes it can deliver high-end earnings and dividend growth for the next few years. That ability to deliver such strong results, despite the current market conditions, is a testament to the strength of its operations, balance sheet, and management team, showing once again that it's in a class of its own.

Matthew DiLallo owns shares of NextEra Energy. The Motley Fool recommends NextEra Energy. The Motley Fool has a disclosure policy.

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