NextEra Energy (NEE -4.09%) stock lost 16.2% in the month of April, or nearly twice the S&P 500's fall, according to data provided by S&P Global Market Intelligence. The biggest drop in the stock price came after NextEra Energy warned about a potential delay in solar projects thanks to a probe by the U.S. government.
Selling pressure on NextEra Energy started to build early in the year as investors fled clean energy stocks in anticipation of rising interest rates at a time when higher input costs and supply bottlenecks were already hurting the industry. So when management warned about project delays last month, some market participants were quick to sell shares in NextEra Energy.
During its first-quarter earnings call on April 21, NextEra Energy's CEO John Ketchum blasted the U.S. government for its recently announced probe on the import of solar panels that could result in hefty retrospective tariffs on solar panels imported from four Southeast Asian countries. This could be a huge blow to companies already battling higher fuel costs. Ketchum also elucidated how the investigation could even ironically force U.S. companies to buy solar panels from China where tariffs are known, unlike in the U.S. where tariffs wouldn't be known for a couple of years under the ongoing probe.
Importantly, management warned that since several suppliers could withhold solar panels from the U.S. until the government's probe update in August, it could delay some of NextEra Energy's solar and storage projects by nearly a year.
NextEra Energy's cautionary note sent solar stocks tanking, with its own shares taking a dip. NextEra Energy is the world's largest producer of solar and wind energy, and one of the largest battery storage companies in the world.
The warning overshadowed a strong first-quarter showing by NextEra Energy. The company's adjusted earnings per share (EPS) grew roughly 10% year over year, with both its utility and clean energy businesses performing well during the quarter. In fact, the quarter was so strong that NextEra Energy even said it will be disappointed if it cannot meet the higher end of its adjusted EPS guidance through 2025.
The sell-off in NextEra Energy shares in April appears overdone. Although the solar probe is a concern, NextEra Energy is a diversified company with a big stake in wind energy as well. There's a chance the uncertainty in solar panel supply could shift focus to wind energy. If that happens, NextEra Energy is well poised to benefit.
Even so, NextEra Energy is still confident of its earlier goals of building 23 to 30 gigawatts of clean energy, including wind, solar, and storage, between 2021 and 2024. NextEra Energy believes that pipeline development should help it grow adjusted EPS by 6% to 8% through 2025 off the 2022 base, and grow annual dividend by around 10% through at least 2024.
That should convince shareholders about NextEra Energy's growth prospects. Also, With the Russia-Ukraine conflict also driving oil prices to dizzying heights and forcing nations across the globe to pay greater attention to alternative sources of energy, I wouldn't be surprised to see NextEra Energy shares win in the long run. Its clean energy business is a growth driver, while its utility business should shine in choppy markets like the ones we're witnessing now.