Shares of NextEra Energy NEE have gained 9.2% in the last three months compared with the Zacks Utility - Electric Power industry’s rally of 5.1%. The company has also outperformed the Zacks Utilities sector in the same time frame.
The increase in NextEra Energy’s share price reflects the company’s solid performance and expanding customer base, which is driving greater demand for its services. The decline in interest rates is expected to enhance the outlook for this capital-intensive business.
Price Performance (Three Months)
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NextEra is trading above its 50-day simple moving average (SMA), signaling a bullish trend. The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important, as this is the first marker of an uptrend or downtrend of the stocks.
NEE’s SMA 50 Day
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Should you consider adding NEE to your portfolio only based on positive price movements? Let’s delve deeper and find out the factors that can help investors decide whether it is a good entry point to add NEE stock to their portfolio.
The strengthening Florida economy is enhancing the company’s outlook by generating new demand opportunities. As the demand for clean electricity grows, NextEra Energy is well-positioned to meet it through strategic investments aimed at upgrading and expanding its infrastructure. NEE’s unit, Florida Power & Light Company’s (“FPL”) residential bills are much lower than the national average, which provides a competitive advantage and attracts new customers.
NextEra Energy, a capital-intensive company with a domestic focus, stands to gain from the Federal Reserve's decision to cut interest rates. The Fed has reduced the benchmark rate by 100 basis points, lowering it from the 5.25-5.5% range to 4.25-4.5%. Additional rate cuts anticipated in 2025 could further reduce the company’s capital servicing costs. NextEra Energy maintains one of the lowest cost structures in the utility industry, thanks to its operational efficiency, economies of scale in renewable energy, and strategically located projects. These strengths support robust profit margins and provide a clear competitive advantage.
NEE’s Energy Resources division continues to pursue long-term investments in clean energy assets. Between 2024 and 2027, the company plans to add 36.5 to 46.5 GW of new renewable capacity to its generation portfolio. Currently, Energy Resources has a renewable project backlog exceeding 28 GW.
Consistent Earnings Surprise
Courtesy of the efficient execution of plans and smart capital investment, NextEra Energy was able to surpass earnings per share expectations in the fourth quarter. The company surpassed expectations in all the past four quarters, with an average earnings surprise of 3.58%.
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NextEra Energy’s Earnings Estimates Moving North
The company expects its 2025 earnings per share to be in the range of $3.45-$3.70 compared with $3.43 a year ago. The Zacks Consensus Estimate for NEE’s 2025 and 2026 earnings per share indicates year-over-year growth of 7.29% and 7.92%, respectively. It expects to increase its earnings per share in the range of 6-8% annually through 2027 from the 2024 level.
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Another prominent utility, Duke Energy Corporation’s DUK Zacks Consensus Estimate for 2025 and 2026 earnings per share indicates year-over-year growth of 7.12% and 6.16%, respectively. Duke Energy’s long-term (three to five years) earnings growth is currently pegged at 6.33%.
NextEra Energy’s Capital Return Program
NextEra Energy plans to increase the dividend rate annually by 10%, at least through 2026, from the 2024 base, subject to its board’s approval. The current annual dividend of the company is $2.27 per share, and the dividend yield of 3% is better than the Zacks S&P 500 Composite’s yield of 1.54%. NextEra Energy has increased its dividend five times in the last five years. Check NEE’s dividend history here.
Duke Energy’s current annual dividend is $4.18 per share, reflecting a dividend yield of 3.72%. Duke Energy has also raised its dividend five times in the last five years.
NextEra Energy Stock Returns Higher Than its Industry
Return on Equity (ROE) shows how effectively a company’s management is utilizing investors’ money to generate returns. The ROE of the company is better than its industry. The current ROE of the company is 12.06% compared with its industry’s 10.34X.
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Another operator in the utility space, Dominion Energy’s D ROE is 9.51X, which is a tad lower than the industry average.
NextEra Energy’s Shares Trading at a Premium
The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis. NextEra Energy is currently trading at 19.7X compared with the industry average of 14.91%.
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DUK and D are also trading at a premium on P/E F12M basis, and are currently trading at 17.93X and 15.9X, respectively.
Wrapping Up
NEE maintains steady performance, supported by growing demand for clean energy across its service areas. Its broad presence across the United States, coupled with falling interest rates, further strengthens its outlook. The company’s efficient operations, large-scale renewable energy capabilities, and strategically positioned projects continue to drive and enhance its overall performance.
Despite its premium valuation, investors can retain this Zacks Rank #3 (Hold) utility in their portfolio, given its stable ROE, rising earnings estimates and regular dividend payment capabilities.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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