NextEra Energy, Inc. (NEE) Bundle
Understanding NextEra Energy, Inc. (NEE) Revenue Streams
Understanding NextEra Energy, Inc.’s Revenue Streams
NextEra Energy, Inc. generates substantial revenue through its two primary subsidiaries: Florida Power & Light Company (FPL) and NextEra Energy Resources (NEER). For the three months ended September 30, 2024, the company reported total operating revenues of approximately $6.7 billion, down from $7.2 billion in the same period of 2023. For the nine months ended September 30, 2024, revenues were approximately $18.2 billion, compared to $19.2 billion in the prior year.
Revenue Breakdown by Source
- Florida Power & Light (FPL): Contributed approximately $4.9 billion for the three months and $13.2 billion for the nine months ended September 30, 2024.
- NextEra Energy Resources (NEER): Generated around $1.8 billion for the three months and $5.0 billion for the nine months ended September 30, 2024.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a decrease of approximately 7.0% for the three months and 5.2% for the nine months ended September 30, 2024, primarily due to reduced storm cost recovery revenues and lower fuel prices.
Contribution of Different Business Segments to Overall Revenue
| Segment | 3 Months Ended Sept 30, 2024 (millions) | 3 Months Ended Sept 30, 2023 (millions) | 9 Months Ended Sept 30, 2024 (millions) | 9 Months Ended Sept 30, 2023 (millions) |
|---|---|---|---|---|
| Florida Power & Light | $4,939 | $5,475 | $13,163 | $14,169 |
| NextEra Energy Resources | $1,223 | $(230) | $2,741 | $2,672 |
| Corporate and Other | $(664) | $266 | $(696) | $22 |
Analysis of Significant Changes in Revenue Streams
During the three months ended September 30, 2024, operating revenues decreased by $536 million compared to the prior year, primarily due to:
- Decreased storm cost recovery revenues of approximately $486 million.
- Lower fuel revenues of approximately $110 million.
This was partially offset by an increase in retail base revenues of approximately $71 million for the three months and $184 million for the nine months.
FPL's average rate base grew by approximately $6.0 billion for the three months and $6.4 billion for the nine months ended September 30, 2024, driven by continued investments in solar generation and transmission improvements.
Overall, the revenue dynamics of NextEra Energy, Inc. illustrate a complex interplay of market conditions, regulatory environments, and operational efficiency across its various segments.
A Deep Dive into NextEra Energy, Inc. (NEE) Profitability
A Deep Dive into NextEra Energy, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 33.6%, compared to 34.1% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 16.2%, down from 18.5% in 2023.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was 10.4%, compared to 12.1% for the same period in 2023.
| Metric | 2024 (9M) | 2023 (9M) |
|---|---|---|
| Gross Profit Margin | 33.6% | 34.1% |
| Operating Profit Margin | 16.2% | 18.5% |
| Net Profit Margin | 10.4% | 12.1% |
Trends in Profitability Over Time: The company has exhibited a declining trend in profitability metrics over the past year. The gross profit margin decreased by 0.5%, operating profit margin decreased by 2.3%, and net profit margin decreased by 1.7%.
Comparison of Profitability Ratios with Industry Averages: The industry average gross profit margin stands at 35%, operating profit margin at 20%, and net profit margin at 12%. This indicates that the company is slightly below industry averages in all three metrics.
Analysis of Operational Efficiency: Cost management remains a critical focus, with operating expenses increasing by 12% year-over-year, primarily due to rising fuel and maintenance costs. The gross margin trend reflects a decrease in revenues from $19.2 billion in the nine months ended September 30, 2023, to $18.2 billion in the same period of 2024.
| Year | Gross Revenue (Millions) | Operating Expenses (Millions) | Gross Profit (Millions) | Operating Profit (Millions) | Net Profit (Millions) |
|---|---|---|---|---|---|
| 2024 | 18,200 | 12,000 | 6,200 | 2,950 | 1,900 |
| 2023 | 19,200 | 10,700 | 8,500 | 3,550 | 2,300 |
Debt vs. Equity: How NextEra Energy, Inc. (NEE) Finances Its Growth
Debt vs. Equity Structure
NextEra Energy, Inc. has a significant capital structure that includes both debt and equity financing. As of September 30, 2024, the company reported total long-term debt of $73,657 million and total short-term debt of approximately $4,205 million. The overall debt-to-equity ratio stands at approximately 1.59, which is higher than the industry average of around 1.47 for utility companies.
The company has been active in debt issuance, with recent total issuances amounting to $16,175 million during the nine months ended September 30, 2024, compared to $9,978 million for the same period in 2023. This increase reflects a strategic move to finance capital expenditures and growth initiatives. Furthermore, NextEra Energy maintains a credit rating of Baa1 from Moody's and BBB+ from S&P, indicating a stable outlook.
NextEra balances its capital structure by leveraging both debt and equity financing. The company’s equity financing includes common stock issuances, with $4,514 million raised from common stock in the last nine months. The management aims to maintain a capital structure that supports a strong investment-grade credit rating while efficiently utilizing low-interest debt to fund its growth.
| Type | Amount (in millions) |
|---|---|
| Long-term Debt | $73,657 |
| Short-term Debt | $4,205 |
| Total Debt | $77,862 |
| Total Equity | $48,891 |
| Debt-to-Equity Ratio | 1.59 |
| Industry Average Debt-to-Equity Ratio | 1.47 |
| Recent Debt Issuances | $16,175 |
| Credit Rating (Moody's) | Baa1 |
| Credit Rating (S&P) | BBB+ |
This balanced approach allows the company to finance its extensive capital projects while managing its risk profile effectively. Overall, NextEra Energy continues to prioritize financial health and operational efficiency through its strategic financing decisions.
Assessing NextEra Energy, Inc. (NEE) Liquidity
Assessing NextEra Energy's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 0.88, calculated from total current assets of $12.18 billion and total current liabilities of $13.84 billion.
Quick Ratio: The quick ratio is approximately 0.67, derived from liquid assets of $2.23 billion (cash and cash equivalents) against current liabilities of $13.84 billion.
Working Capital Trends: The working capital for the company is negative, indicating potential liquidity concerns. The total working capital is calculated as current assets minus current liabilities, resulting in approximately -$1.66 billion.
| Period | Current Assets (millions) | Current Liabilities (millions) | Working Capital (millions) |
|---|---|---|---|
| September 30, 2024 | $12,180 | $13,840 | -$1,660 |
| December 31, 2023 | $15,361 | $27,963 | -$12,602 |
Cash Flow Statements Overview:
- Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $11.28 billion, up from $8.42 billion in the previous year.
- Investing Cash Flow: Net cash used in investing activities was $18.38 billion, compared to $18.78 billion for the same period in 2023.
- Financing Cash Flow: Net cash provided by financing activities was $6.26 billion, down from $9.70 billion in the prior year.
Cash Flow Summary:
| Cash Flow Type | 9 Months Ended September 30, 2024 (millions) | 9 Months Ended September 30, 2023 (millions) |
|---|---|---|
| Operating Activities | $11,279 | $8,423 |
| Investing Activities | -$18,384 | -$18,777 |
| Financing Activities | $6,259 | $9,703 |
Liquidity Strengths: At September 30, 2024, the company reported a total net available liquidity of $12.04 billion, comprising various credit facilities and cash reserves as detailed below:
| Liquidity Component | Amount (millions) |
|---|---|
| Syndicated Revolving Credit Facilities | $14,087 |
| Bilateral Revolving Credit Facilities | $5,980 |
| Cash and Cash Equivalents | $2,228 |
| Commercial Paper and Other Short-Term Borrowings | -$7,010 |
| Net Available Liquidity | $12,041 |
Potential Liquidity Concerns: The current and quick ratios indicate potential liquidity pressures. The reliance on short-term borrowings and the negative working capital trend could pose risks if cash flows from operations do not improve or if capital expenditures increase significantly.
Is NextEra Energy, Inc. (NEE) Overvalued or Undervalued?
Valuation Analysis
In evaluating the financial health of the company, we will analyze key valuation metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for the company is approximately 24.5, based on earnings per share (EPS) of $2.79 for the trailing twelve months.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.2, indicating that the stock is trading at a premium over its book value, which is approximately $25.00 per share.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 15.8, with an enterprise value of approximately $99 billion and EBITDA of $6.25 billion.
Stock Price Trends
Over the last 12 months, the stock price has shown a trend from a low of $70.00 to a high of $90.00. The current stock price is approximately $85.00, reflecting a 15% increase year-to-date.
Dividend Yield and Payout Ratios
The current dividend yield is 2.4%, with an annual dividend of $2.04 per share. The payout ratio stands at 72%, indicating a healthy balance between retaining earnings and returning value to shareholders.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a mixed outlook with 45% buy, 35% hold, and 20% sell ratings. The average target price set by analysts is $88.00.
| Metric | Value |
|---|---|
| P/E Ratio | 24.5 |
| P/B Ratio | 2.2 |
| EV/EBITDA Ratio | 15.8 |
| 12-Month Low Stock Price | $70.00 |
| 12-Month High Stock Price | $90.00 |
| Current Stock Price | $85.00 |
| Dividend Yield | 2.4% |
| Annual Dividend | $2.04 |
| Payout Ratio | 72% |
| Analyst Buy Rating | 45% |
| Analyst Hold Rating | 35% |
| Analyst Sell Rating | 20% |
| Average Analyst Target Price | $88.00 |
Key Risks Facing NextEra Energy, Inc. (NEE)
Key Risks Facing NextEra Energy, Inc.
NextEra Energy, Inc. faces a variety of internal and external risks that could significantly impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The energy sector is characterized by intense competition, particularly in renewable energy. NextEra competes with both traditional utility companies and new entrants focused on clean energy. As of September 30, 2024, the company reported a net income of $1,852 million for the third quarter, which reflects its ability to manage competitive pressures, but ongoing competition could affect future profitability.
Regulatory Changes
Regulatory environments can change rapidly, impacting operational costs and pricing. In March 2024, NextEra filed a shelf registration statement with the SEC for an unspecified amount of securities, which underlines its need for flexible capital strategies in response to regulatory shifts.
Market Conditions
Market volatility can affect commodity prices, which directly impacts profitability. For instance, the company recorded a decrease in operating revenues of $536 million in Q3 2024, primarily due to lower fuel prices and the completion of storm cost recovery surcharges.
Operational Risks
Operational risks arise from the company's reliance on physical assets and infrastructure. As of September 30, 2024, NextEra's long-term debt stood at $73,657 million, presenting a significant obligation that could strain operational flexibility. Additionally, the company’s interest expense increased by $507 million in Q3 2024 due to higher average interest rates and debt balances.
Financial Risks
Interest rate fluctuations pose a significant risk to NextEra's financial stability. The company's interest rate contracts had net unrealized losses of $(1,107) million as of September 30, 2024. Furthermore, a hypothetical 10% decrease in interest rates would increase the fair value of net liabilities by approximately $3,107 million.
Strategic Risks
Strategic risks include the potential for impairments in investments. In 2023, NextEra recorded an impairment charge of approximately $1.2 billion related to its investment in NEP. Such strategic missteps could lead to significant financial losses and affect investor confidence.
Mitigation Strategies
NextEra employs various strategies to mitigate these risks. The company uses a value-at-risk (VaR) model to measure commodity price market risk, with VaR figures indicating a total exposure of approximately $49 million as of September 30, 2024. Additionally, the company has established credit policies to manage counterparty credit risk, with an exposure totaling approximately $2.9 billion.
| Risk Type | Impact | Current Financial Figures |
|---|---|---|
| Industry Competition | Pressure on profitability | Net income: $1,852 million (Q3 2024) |
| Regulatory Changes | Potential operational cost increases | Shelf registration filed for unspecified amount |
| Market Conditions | Revenue fluctuations | Operating revenue decrease: $(536 million) (Q3 2024) |
| Operational Risks | Strained operational flexibility | Long-term debt: $73,657 million |
| Financial Risks | Increased interest expense | Interest expense increase: $507 million (Q3 2024) |
| Strategic Risks | Potential impairments | Impairment charge: $(1.2 billion) (2023) |
| Mitigation Strategies | Risk management policies | Credit risk exposure: $2.9 billion |
Future Growth Prospects for NextEra Energy, Inc. (NEE)
Future Growth Prospects for NextEra Energy, Inc.
NextEra Energy, Inc. is positioned to leverage several growth opportunities in the coming years, driven by a combination of market expansions, product innovations, and strategic initiatives.
Key Growth Drivers
- Investments in Renewable Energy: The company plans to invest approximately $21.1 billion in renewable energy projects from 2024 to 2028, focusing on wind and solar generation.
- Market Expansion: NextEra Energy aims to expand its market presence, particularly in states with increasing demand for renewable energy.
- Acquisitions: The acquisition of renewable energy portfolios, including the recent RNG Acquisition in March 2023, is expected to enhance its service offerings and revenue streams.
Future Revenue Growth Projections
Analysts project that NextEra Energy will experience a revenue growth rate of approximately 8.5% annually through 2028, driven by increased demand for clean energy solutions and ongoing infrastructure investments.
Earnings Estimates
The company’s earnings per share (EPS) are expected to increase, reaching approximately $3.50 by 2026, up from $2.79 in 2024.
Strategic Initiatives and Partnerships
- Joint Ventures: NextEra Energy is pursuing joint ventures to enhance its capabilities in energy storage solutions, which are critical for balancing renewable energy supply and demand.
- Technology Investments: The company has committed around $190 million in technology investments through 2031 to improve operational efficiency and sustainability.
Competitive Advantages
NextEra Energy's competitive advantages include:
- Market Leadership: The company is the world's largest generator of renewable energy from the wind and sun, which positions it favorably in the energy market.
- Strong Brand Recognition: NextEra Energy has established a strong brand associated with sustainability and innovation, attracting environmentally-conscious consumers and investors.
- Robust Financial Health: As of September 30, 2024, NextEra Energy reported total assets of $186 billion and net available liquidity of $12 billion, providing a solid foundation for future investments.
| Year | Capital Expenditures (in millions) | Revenue Growth Rate (%) | EPS Estimate ($) |
|---|---|---|---|
| 2024 | 20,108 | 8.5 | 2.79 |
| 2025 | 21,105 | 8.5 | 3.00 |
| 2026 | 22,000 | 8.5 | 3.50 |
| 2027 | 23,000 | 8.5 | 4.00 |
| 2028 | 24,000 | 8.5 | 4.50 |
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Article updated on 8 Nov 2024
Resources:
- NextEra Energy, Inc. (NEE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NextEra Energy, Inc. (NEE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View NextEra Energy, Inc. (NEE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.