NextEra Energy (NEE 0.42%) has been leading the charge toward renewable energy. The utility's leadership continues to pay dividends, which was evident in the third quarter as it generated strong earnings growth despite all the economic uncertainty. Because of that, it's on track to deliver excellent full-year results, likely at the high-end of its guidance range.
A closer look at NextEra Energy's third-quarter earnings
|
Metric |
Q3 2020 |
Q3 2019 |
Year-Over-Year Change |
|---|---|---|---|
|
Adjusted Earnings |
$1.311 billion |
$1.163 billion |
12.7% |
|
Adjusted Earnings Per Share |
$2.66 |
$2.39 |
11.3% |
Data source: NextEra Energy.
NextEra Energy's earnings surged by a double-digit pace, powered by strong results across each of its three business units:
Data source: NextEra Energy. Chart by the author.
Earnings at Florida Power & Light (FPL) jumped nearly 11% year over year. Driving that increase was the continued improvement in that business unit and the $1.3 billion of expansion projects it completed during the period, which helped it grow its customer count by nearly 80,000 from the prior year.
Meanwhile, earnings at the company's other Florida-based utility, Gulf Power, surged almost 14% year over year. Driving that growth was the company's integration plan to cut costs and make high-return investments at the recently acquired entity. NextEra is progressing toward the next step of fully integrating that business by merging it with FPL. It received approval last month and plans to combine the two entities next January. Gulf Power will still operate as a separate division next year with its own retail rates. However, FPL hopes to have one combined rate in effect by January of 2022.
Finally, earnings within the company's energy resources segment soared more than 24%. While the business unit benefited from new investments that entered service over the past year, the main factor powering the year-over-year increase was the company's decision to write down some development costs in the year-ago period.
Image source: Getty Images.
A look at what's ahead for NextEra Energy
Last month, NextEra updated investors on its financial expectations for the next few years. For 2020, the company expects to earn between $2.18 to $2.30 per share after taking into account an upcoming stock split. At the midpoint, that's 7% above last year's level. Meanwhile, it expects its earnings in 2021 to increase to a split-adjusted $2.40 to $2.54 per share, a more than 10% increase at the midpoint thanks to its high-powered renewable-energy development program. Finally, it anticipates growing its earnings in 2022 and 2023 at a 6% to 8% annual pace from that higher 2021 baseline level.
The company did comment that it would be "disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectations ranges through 2023." That fast-paced growth should support around 10% annual dividend increases through at least 2022.
One of the main factors powering that growth is the company's renewable-energy development program. NextEra added 2.2 gigawatts (GW) of new projects to its backlog during the third quarter, including the world's biggest stand-alone battery-storage project. That increased its overall backlog to more than 15 GW, larger than its existing renewable-energy portfolio.
A bright future for this utility
NextEra Energy's leading renewable-energy development business has helped power significant growth in recent years. That should continue for the foreseeable future, given the enormous size of its project backlog. Those investments should give the company the power to continue increasing its dividend and generating above-average total returns.
