Energy
Tuesday, June 18th, 2024 3:56 pm EDT
Key Points
- NextEra Energy’s stock dropped nearly 5% following its announcement to issue $2 billion in equity units priced at $50 each. These funds are intended to finance energy projects amidst rising electricity demand and to repay debt.
- Despite the stock decline, NextEra Energy is recognized for operating the largest portfolio of renewable energy in the U.S. The company plans to utilize these equity funds for energy investments and general corporate purposes, including debt repayment.
- Investor sentiment towards NextEra Energy has been mixed. While utility stocks have rallied on bullish expectations of increased electricity demand, NextEra’s recent stock performance has fluctuated. Analysts remain optimistic about the company’s long-term growth prospects, with a majority rating it as a buy and projecting a potential 6.5% increase in its stock price based on an average target of $77.08 per share.
NextEra Energy’s stock experienced a nearly 5% decline in early trading following the company’s announcement of plans to raise $2 billion through equity units aimed at financing energy projects and debt repayment. The Florida-based utility, renowned for its extensive portfolio of renewable energy assets in the U.S., priced these equity units at $50 each, with obligations to purchase shares by June 1, 2027. NextEra Energy Capital Holdings intends to allocate these funds towards energy investments and general corporate purposes, including the repayment of commercial paper.
Investors have recently favored utility stocks, buoyed by increasing electricity demand driven by data centers, domestic manufacturing resurgence, and the shift towards electric vehicles. Over the past three months, the utility sector has outperformed the broader market, with a gain of 8.5%, surpassing the S&P 500’s 6.2% increase. NextEra Energy, in particular, has seen robust performance, climbing 20% during this period and posting a 19% year-to-date rise, positioning itself among the top performers in the S&P 500 utilities sector.
However, despite this strong performance, NextEra Energy’s stock retreated approximately 8% over the last month. This decline was exacerbated following the company’s recent investor day, where some stakeholders expressed disappointment over the perceived lack of aggressive earnings growth forecasts, despite anticipated robust energy demand projections for the next decade. NextEra outlined expectations of a 38% increase in U.S. power demand over the next two decades, with a substantial portion being met through renewable energy sources and battery storage solutions. The company anticipates capital expenditures totaling between $65 billion and $70 billion from 2024 to 2027, underscoring its ambitious growth plans.
Analysts at Goldman Sachs view the recent dip in NextEra’s stock price as a buying opportunity, highlighting the company’s strong long-term growth prospects amidst expected growth in power demand. They emphasized that while there might be logistical delays in project execution impacting short-term earnings, the overall trajectory remains positive. Currently, a majority of Wall Street analysts maintain a bullish outlook on NextEra Energy, with approximately 71% rating the stock as a buy. The average price target of $77.08 per share suggests a potential 6.5% upside from Monday’s closing price, reflecting continued optimism despite recent market fluctuations.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/18/hot-utility-stock-nextera-falls-nearly-5percent-after-announcing-plan-to-sell-2-billion-in-equity-units.html
