What happened
Shares of renewable energy company NextEra Energy Partners (NEP -1.49%) tumbled this week and were trading down 11.5% for the week through Friday noon ET, according to data provided by S&P Global Market Intelligence. NextEra reported its first-quarter earnings this week, and although the company fared well and also announced a dividend hike, some analysts are worried.
So what
NextEra reported 8.5% year-over-year growth in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) for the first quarter, driven primarily by new projects worth 1.2 gigawatts that it acquired last year. NextEra acquires clean energy assets primarily from its parent company, NextEra Energy, or third parties and operates them to generate energy that it then sells under long-term contracts.
For example, alongside its quarterly numbers, NextEra announced a deal to acquire 690 megawatts of wind and solar projects from its parent company and believes this acquisition will help it meet its 2023 targets for adjusted EBITDA and cash available for distribution.
Management is a lot more excited about NextEra's prospects after its first-quarter performance, with CEO John Ketchum even claiming the company "has never had more visible growth opportunities than it has today."
NextEra also announced a quarterly dividend per share of $0.8425 per share, up almost 15% from last year on an annualized basis.
Now what
NextEra's numbers look great, so why did the stock still fall this week? There are a couple of reasons. First, NextEra's revenue and earnings missed analysts' estimates, and the market doesn't like earnings misses.
Second, the renewable energy stock attracted several downgrades after earnings. KeyBanc analyst Sangita Jain, for example, downgraded NextEra Energy Partners stock's rating, citing "impending equity dilution in an unfavorable landscape" as the reason, according to The Fly. Credit Suisse analyst Maheep Mandloi, meanwhile, cut the stock's price target to $78 per share from $87 apiece this week.
Frankly, I believe the fall in NextEra Energy Partners' share price this week makes little sense and offers investors a solid opportunity to buy a compelling stock. NextEra is on solid footing and is a great dividend stock, with a high yield of 5.8%. This week, management also reiterated its goal to grow dividends by 12% to 15% per year through "at least" 2026.
