NextEra Energy Earnings: Strong Execution Supports Industry-Leading Growth

We are maintaining our $82 fair value estimate for NextEra Energy NEE after the company reported second-quarter operating earnings per share of $0.88, up from $0.81 in the year-ago quarter. Management reaffirmed its guidance for 2023 EPS of $2.98-$3.13, in line with our estimate, and 6%-8% earnings growth through 2026; we expect the company to achieve the high end of the latter range. Our narrow economic moat and stable moat trend ratings are unchanged.

At Florida Power & Light, regulatory capital growth continues to be among the highest of its peer group, growing 12.1% from the year-ago quarter, supporting 14% earnings growth at the unit. FPL has consistently increased regulatory capital above 10%. Major capital initiatives, including continued investment in solar generation and transmission and distribution infrastructure, should support peer-leading regulatory growth. The company plans to invest $32 billion-$34 billion during 2022-25; we expect investment at the high end of that range.

NextEra Energy Resources’ earnings grew 11%, supported by new investments and favorite market conditions at the unit’s customer supply and trading segment, partially offset by higher interest costs and below-normal wind resources at some of its legacy assets. Changes in near-term performance driven by variable weather do not affect our fair value estimate. The company added 1.8 gigawatts into service and an additional 1.7 gigawatts into its backlog. The unit’s backlog is now 20 gigawatts, supporting our expectations for the company to achieve the midpoint of the unit’s 32.7-41.8 gigawatts of development. The unit also added a second memorandum of understanding for a green hydrogen joint venture. We continue to believe that hydrogen could become to be a material growth opportunity beyond our five-year growth outlook.