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NextEra Energy’s NEE well-chalked out capital investment plan, addition of renewable generation assets and strategic acquisitions are going to drive its performance over the long run. In the last four reported quarters, the company registered an average earnings surprise of 8.4%.

This Zacks Rank #3 (Hold) stock is exposed to inherent risk of operating nuclear generation facilities. Also, unfavorable supply costs could adversely impact earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Acting as Tailwinds

NextEra Energy has well-chalked plans to invest $43.8 billion in different projects in the 2024-2028 time frame to strengthen its transmission and distribution operation, and add renewable energy sources in production and storage projects. The systematic investment will further strengthen and expand operation of the company.

NEE also makes strategic acquisitions to expand its operation. The buyouts of Gulf Power Company, Florida City Gas and ownership stakes in two natural gas power plants from Southern Company will further expand the regulated natural gas operation of the company and be accretive to its earnings over the long term. Acquisitions of a large portfolio of operating landfill gas-to-electric facilities by Energy Resources will support the company’s expanding RNG business.

NextEra’s unit Energy Resources continues to work on its strategy of making a long-term investment in clean energy assets. The company expects to be able to add 33-42 gigawatts of new renewables in the 2023-2026 time frame to the generation portfolio via clean energy investments. Energy Resources will invest $9.8 billion in various renewable projects to further expand its portfolio. Management has plans to invest $18.3 billion in this segment in the 2024-2028 period.

The company has plans to generate more energy from clean sources and systematic investments are helping it to do the same. The investments are also aiding NEE to lower carbon emissions from the production process. These initiatives will help the company to achieve reducing carbon dioxide emissions rate to 67% by 2025 from 2005 base. In addition, utilities like Duke Energy Corporation DUK, Xcel Energy XEL and Dominion Energy D are investing considerably to lower carbon emissions, and add more renewable and clean sources to their generation portfolio.

Headwinds

The operation and maintenance of NEE's and Florida Power & Light Company’s (FPL) nuclear generation facilities involve environmental, health and financial risks that could result in fines or closure of the facilities, as well as increased costs and capital expenditures.

Unfavorable supply costs, necessary to provide full energy and capacity requirement services, could have an undesirable impact on the company’s earnings outcome. The still-high interest rate is a concern for the capital-intensive industry.

NextEra Energy’s shares have gained 5.3% compared with the industry’s gain of 2.9% in the past month.

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