NextEra Energy (NEE 3.15%) continues to benefit from the accelerating shift toward cleaner energy sources. The giant utility delivered strong third-quarter results, powered by its leading renewable energy business. That has it well-positioned to deliver on its long-term growth outlook and continue creating value for its shareholders.
Diving into the third-quarter results
According to the report it released Wednesday morning, NextEra Energy generated $1.483 billion, or $0.75 per share, of adjusted net income during the third quarter. That was 12% higher year over year on a per-share basis, which is pretty remarkable growth for a large-scale utility. The company benefited from "continued strong financial and operational performance across all the businesses," CEO Jim Robo said in the earnings release.
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The company's two Florida utilities delivered solid results. FPL grew its net income by more than 10%, powered by new investments. NextEra Energy continues to invest capital into this business -- including $1.5 billion in Q3 alone -- which has grown its regulated asset base by 10.5% over the past year.
One of the highlights for FPL in the quarter was a proposed long-term settlement agreement in its rate case. If approved, it would enable NextEra to continue operating efficiently while investing in clean energy by helping accelerate the build-out of additional solar energy capacity.
Meanwhile, its Gulf Power utility generated steady results. NextEra continues to integrate that business and is in the process of merging it with FPL.
Finally, the energy resources segment grew its adjusted net income by more than 12% year over year. This segment also benefited from new investments. The company continues to build out one of the world's largest clean energy platforms. The business had another record quarter of renewable energy project originations, giving it more power to support its industry-leading long-term growth forecast.
What's ahead for NextEra Energy
"NextEra Energy delivered strong third-quarter results," according to Robo. Because of that, it "remains well-positioned to meet our 2021 and long-term growth expectations." For 2021, the company anticipates generating between $2.40 to $2.54 per share of adjusted earnings. At the midpoint, that's about 7% above 2020's total. One of the growth drivers is the continued accretion of its 2019 Florida acquisitions from Southern Company, which included Gulf Power.
The company expects to continue growing from that base over the next few years. It anticipates its adjusted earnings will expand at a 6% to 8% annual pace through at least 2023. Management noted that it would be disappointed if it didn't deliver financial results at or near the top end of those ranges through 2023. Further, the company expects that its growing earnings will allow it to boost its dividend by about 10% annually through at least 2022, though with a slight increase to its dividend payout ratio.
Much of the industry-leading growth that NextEra anticipates will be provided by its clean energy investments. For example, at FPL, the company is building the Manatee Energy Storage Center. At 409 megawatts (MW), it will be the world's largest integrated solar-powered battery system. In addition, FPL continues to work on the ambitious "30-by-30" program it announced in 2019, the goal of which is to install 30 million new solar panels in the state by 2030. NextEra said in June that it was more than 40% of the way to its target, having already installed more than 12 million panels in the state.
The company is also working to clean up the power generating profile of Gulf Power. It expects to complete construction on two solar farms with a total of 150 MW of energy generating capacity (enough to power 30,000 homes) over the next six months to support that utility.
Finally, NextEra's energy resources segment continues to build out one of the world's largest renewable energy businesses. The company added a record 2,160 MW of new projects to its backlog during the third quarter, boosting the total to 18,100 MW. One of the highlights was 1,240 MW of new wind additions, its best-ever quarter for wind. It also added 515 MW of new solar projects and 345 MW of new energy storage. These projects will not only help reduce carbon emissions but will also power continued earnings growth for NextEra.
The wind's at its back
NextEra was an early leader in the industry's transition to cleaner energy sources. That strategy has paid off for its shareholders over the years as the company has delivered above-average earnings and dividend growth, and market-crushing total returns. Given its industry-leading growth profile, it's well-positioned to continue growing its value for investors as the global push to decarbonize accelerates.
