Is NextEra Energy Inc a Buy After Its Latest Earnings Report?

NextEra Energy (NYSE:NEE) reported its second-quarter financial results on June 24. The utility giant generated robust earnings growth, as its adjusted earnings per share surged 9.5%. The company is benefiting from strong power demand growth from AI data centers and other catalysts.

Here’s a closer look at that report and whether investors should buy the utility stock right now.

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Another strong showing

NextEra Energy reported $2.4 billion, or $1.15 per share of adjusted earnings, in the second quarter, up 9.5% compared to the year-ago period. Both the utility’s businesses, FPL and Energy Resources, delivered strong results.

The company’s regulated electric utility in Florida, FPL, generated $1.4 billion in net income, up nearly 11% year over year. It continues to benefit from Florida’s economic growth, adding more than 90,000 customers over the past year. That’s driving heavy capital spending ($12 billion to $13 billion this year) to support the state's growing power demand. FPL is seeing robust demand from data center developers and other large customers.

Meanwhile, its clean energy infrastructure development platform, NextEra Energy Resources, reported earnings growth of more than 18% to about $1.3 billion. It placed 1.1 gigawatts (GW) of new projects into service over the past three months to support growing power demand from other utilities and large customers. The company also energized a new 137-mile transmission line in New Mexico to strengthen grid reliability in the state.

Powerful growth still ahead

NextEra Energy believes it will continue growing briskly for years to come. Its baseline expectation is to deliver more than 8% compound annual adjusted earnings per share growth through 2032, with a target to maintain that same growth rate from 2032 to 2035. It has multiple growth catalysts. FPL has roughly 21 GW of large-load interest from data center developers and other large power users, including 12 GW in advanced discussions that could begin delivery as soon as 2028. Meanwhile, NextEra Energy Resources has 35.1 GW in its backlog, most of which it expects to deliver by the end of the decade. It also remains on track to restart its Duane Arnold nuclear power plant by 2029 to support Google’s growing power demand and was selected to develop two large-scale transmission projects in Illinois.

While NextEra already has robust growth in its existing businesses, it aims to further enhance its strong growth profile by combining with Dominion. That $67 billion deal will create the world’s largest regulated electric utility. NextEra expects the deal will accelerate its earnings growth rate to more than 9% annually through 2032, with a target of maintaining that rate through 2035. Dominion’s electric utility in Virginia is benefiting from strong power demand growth from data centers, and the combined company would be better positioned to support it.

Is NextEra a buy?

NextEra’s robust growth has helped power its stock, which is up more than 22% over the past year. As a result, it currently trades at more than 22 times forward earnings, which is higher than its peers (19 to 21 times range) and the S&P 500 (21.5x).

However, that’s still a fairly attractive value to pay for this leading utility stock. It’s the largest player in the space and growing faster than most of its peers. It could generate double-digit average annual total returns from here by adding its growth rate to its current dividend yield (2.8%). That’s a strong return from a lower-risk investment, making NextEra still look like a compelling buy after its earnings report.

Matt DiLallo has positions in Alphabet and NextEra Energy. The Motley Fool has positions in and recommends Alphabet and NextEra Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.