NextEra Energy Held in Balance - Analyst Blog

On Jun 4, we have issued an updated research report on utility operator NextEra Energy Inc. NEE. The steady economic improvement in the company's Florida service territory will offer encouraging growth prospects. The combination of a stable customer base and rising energy sales volume are certainly signs of positive market fundamentals.

However, price volatilities might continue to act as a potential headwind. In addition, the company's transmission and distribution infrastructure is vulnerable to extreme weather conditions.

NextEra Energy, a Zacks Rank #3 (Hold) stock, bounced back from the dull fourth quarter 2013 earnings to report a strong bottom-line beat in first-quarter 2014. On a year-over-year basis, earnings and revenues outperformed on the back of healthy electric rates and increased sales volume.

We believe there are plenty of opportunities for NextEra Energy's renewable generation business given the current favorable climate for green energy in the U.S. The Obama administration recently announced its plans to cut back carbon emissions from power plants by 30% by 2030 from 2005 levels. This could provide a stimulus to NextEra Energy's large-scale pro-green investments. The company plans to invest around $2.0 billion in wind and solar assets for the remainder of 2014.

In addition, NextEra Energy's large-scale modernization programs are anticipated to strengthen its service reliability, leading to customer retention. Two of the company's key upgrade programs in Florida already commenced operations - the Cape Canaveral facility and the Riviera Beach facility.

Even so, accidents could disrupt NextEra's regular operations and affect the company's financial performance. Recently, a plane crashed into  NextEra Energy's South Dakota wind farm causing damage to one of its turbines.

Key Picks from the Sector

Other better-ranked utility players include NRG Energy Inc. NRG, Korea Electric Power Corp. KEP and CPFL Energia S.A. CPL. All the above stocks currently carry a Zacks Rank #1 (Strong Buy).