NextEra Energy NEE is trading above its 50-day simple moving average (SMA), signaling a bullish trend. NEE’s shares have gained steadily over the past twelve months after the earnings beat in the trailing four quarters.

NEE's SMA 50 day

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The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend of the stocks.

The company benefits from its well chalked out investment plan to strengthen its operations, strategic acquisitions, rising customer base and improvement in the economic condition in its service regions.

NextEra Energy has outperformed the Zacks Utility Electri Power industry, the Zacks Utilities sector and the S&P 500 in the past year.

NextEra Outperforms Industry, Sector & S&P 500 (One Year)

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Should you consider adding NEE to your portfolio only based on positive price movements? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add NEE stock to their portfolio.

Factors Acting as Tailwind for the NEE Stock

NextEra Energy continues to benefit from improving economic conditions in Florida. NEE’s unit Florida Power & Light Company’s (“FPL”) residential bills are much lower than the national average, which provides a competitive advantage. FPL has been undergrounding power lines for years, which has increased the reliability of its services and strengthened its power distribution infrastructure. The strong infrastructure allows FPL to efficiently serve the demands of its expanding customer base.

NextEra Energy continues to make long-term investments in clean energy assets. The company expects to be able to add 36.5-46.5 GW of new renewables in the 2024-2027 period to the generation portfolio via clean energy investments.

The U.S. Federal Reserve’s decision to reduce the interest rate by 100 basis points will lower the capital servicing expenses of NextEra Energy. NEE’s management is now targeting $97 billion- $107 billion of capex over the 2024 -2027 period to strengthen its existing operations.

NextEra Energy, with its expanding renewable assets, is well-positioned to capitalize on the expected power demand growth in the United States. The development of large data centers and rising demand from industrial and commercial space will continue to boost electricity demand.

NextEra Energy’s Earnings Estimates Moving North

The Zacks Consensus Estimate for NEE’s 2025 and 2026 earnings per share indicates year-over-year growth of 7% and 7.97%, respectively. The company expects to increase its earnings per share in the range of 6-8% annually through 2027 from the 2024 level.

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NEE’s Earnings Surprise

NextEra Energy has been a consistent performer, the company has been making smart investments to provide high-quality services to its customers. The strategic acquisitions are also contributing toward the strong performance of the company. It has outperformed estimates in the past four quarters.

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NEE Stock Returns Better Than its Industry

NextEra Energy’s trailing 12-month return on equity (ROE) is 11.85%, ahead of the industry average of 9.75%. ROE is a financial ratio that measures how well a company uses its shareholders’ equity to generate profits. The current ROE of the company indicates that it is using shareholders’ funds more efficiently than its peers.

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Another stock, Dominion Energy D, which operates in the same industry, currently carries a ROE of 8.71%, which is lower than its industry.

NextEra Energy’s Capital Return Program

NextEra Energy plans to increase the dividend rate annually by 10%, at least through 2026, from the 2024 base, subject to its board’s approval. The current annual dividend of the company is $2.27 per share, and the dividend yield of 3.08% is better than the Zacks S&P 500 Composite’s yield of 1.61%. Check NEE’s dividend history here.

Another utility, American Electric Power’s AEP current annual dividend is $3.72 per share, reflecting a dividend yield of 3.52%.

NextEra Energy’s Shares Trading at a Premium

The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis. NextEra Energy is currently trading at 19.69X compared with the industry average of 14.45%.

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Summing Up

NextEra Energy continues its stable performance, backed by rising demand for clean energy in its service territories. The company continues to add clean energy assets to meet the rising demand. The strong economic condition in Florida continues to create new opportunities for the company.

Given the improvement in earnings estimates and return on equity, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility. Since NEE is trading at a premium, it is better to wait for a while and look for a better entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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