Insights

• NextEra Energy demonstrates strong revenue growth and efficient operations, as evidenced by its high EBITDA margin and increasing sales.
• The company faces potential liquidity challenges due to its low current ratio and quick ratio, which are below industry averages.
• Increasing long-term debt and reliance on debt financing raise concerns about the company's long-term solvency and financial risk.
• While profitability metrics like ROA and ROE are above industry averages, their decreasing trends warrant monitoring for potential future declines.
• Non-recurring items and fluctuations in net income highlight the importance of analyzing sustainable earnings and understanding the impact of unusual expenses.

Analysis

• Revenue - Revenue is trending upward, indicating growth in the company's top line. - The YoY growth is greater than the 5-year CAGR, indicating growth acceleration. - Sales/revenue experienced positive growth in 5 of the last 8 quarters.

  • Profitability

    • Gross profit margin and net profit margin are trending downward, indicating decreasing profitability.
    • The return on average assets, return on average total equity, and return on average invested capital are greater than the industry average, indicating better profitability.
    • The EBITDA margin is trending upward, indicating improving operating efficiency.

  • Liquidity

    • The current ratio and quick ratio are less than 1 and below the industry average, indicating potential liquidity issues.
    • The current ratio and quick ratio are trending downward, suggesting worsening liquidity.
    • The company may face challenges in meeting its short-term obligations.

  • Solvency

    • The total debt to total equity ratio is slightly above the industry average, indicating a higher reliance on debt financing.
    • The debt / EBITDA is trending downward, indicating improving solvency.
    • The company's ability to manage its debt obligations relative to its earnings is improving.

  • Operational Efficiency

    • The EBITDA margin is significantly higher than the industry average, indicating efficient operations.
    • The company is effectively managing its operating expenses and generating strong operating profits.
    • The return on average total capital is trending upward, indicating improving efficiency.

  • Cash Flow Analysis - Net operating cash flow decreased significantly in the most recent quarter, driven by lower net income and changes in working capital. - Capital expenditures have generally decreased over the past few quarters, potentially indicating a shift in investment strategy. - The company has relied on debt financing to fund its operations and investments, as evidenced by the issuance of debt.

  • Risk Factors

    • The low current ratio and increasing long-term debt are potential red flags that warrant further investigation.
    • The company's reliance on debt financing increases its financial risk.
    • Fluctuations in net income and unusual expenses can impact the company's overall profitability.

  • Future Outlook

    • Continued investments in infrastructure and renewable energy projects are expected to drive further growth in fixed assets.
    • The company's access to credit facilities and capital markets should support its financing needs.
    • Monitoring the current ratio and debt-to-equity ratio will be crucial to assess the company's liquidity and solvency positions.

Benchmarks (as of 2025-03-21)

• Performance Comparison:

  • NextEra Energy (NEE) has generally underperformed the Utilities Select Sector SPDR Fund (XLU) across most time periods. Over the past three years, NEE has shown negative returns (-8.24%), while XLU has provided positive returns (19.74%). More recently, NEE has underperformed XLU year-to-date (-0.2% vs. 3.25%). However, NEE did outperform XLU over the last month (0.94% vs. -1.4%).
  • The consistency of NEE's performance relative to XLU has been weak, with periods of underperformance outweighing periods of outperformance.

• Risk and Return Analysis:

  • The annualized returns of NEE have been lower than those of XLU over the past one, two, and three years. For example, the three-year annualized return for NEE is -2.82%, compared to 6.19% for XLU.
  • The annualized volatility of NEE has generally been higher than that of XLU, indicating that NEE's returns are more dispersed. For example, in Q4 2023, NEE's volatility ranged from 22.53% to 54.19%, while XLU's ranged from 16.09% to 31.98%.
  • The maximum drawdown for NEE was -44.97% on 10/09/2023, while the maximum drawdown for XLU was -25.26% on 10/02/2023. This indicates that NEE is riskier than XLU in terms of potential losses from peak to trough.

• Risk-Adjusted Performance:

  • The Sharpe Ratio of NEE has generally been lower than that of XLU, indicating that NEE has not offered as good of a risk-adjusted return as XLU.
  • The beta value of NEE has been consistently below 1, indicating that NEE is less volatile than the overall market. However, NEE's beta has generally been higher than XLU's, indicating that NEE is more sensitive to market movements than XLU.

• Overall Assessment:

  • Based on the analysis, NextEra Energy (NEE) has underperformed the Utilities Select Sector SPDR Fund (XLU) in terms of historical performance, annualized returns, and risk-adjusted returns. NEE has also exhibited higher volatility and larger drawdowns than XLU, indicating a riskier investment profile.
  • A significant trend is the recent convergence of beta values between NEE and XLU, suggesting a decrease in NEE's sensitivity to market movements. However, NEE's higher volatility and larger drawdowns remain concerns.

Peers Price History(as of 2025-03-21)

• Performance Comparison:

  • NextEra Energy, Inc. (NEE) has generally underperformed Duke Energy Corp. (DUK) and The Southern Co. (SO) across various time periods. For the year-to-date (YTD) period, NEE's return is -0.2%, while DUK is at 11.48% and SO is at 9.81%. Over a longer horizon, such as the 3-year period, NEE's return is -8.24%, compared to 25.06% for DUK and 44.41% for SO. This consistent underperformance suggests that NEE has not delivered the same level of returns as its peers.

• Risk and Return Analysis:

  • The annualized returns for NEE are lower than those of DUK and SO. For example, the 3-year annualized return for NEE is -2.82%, while it is 7.74% for DUK and 13.03% for SO. This indicates that NEE has provided lower returns compared to its peers over the long term.
  • NEE's annualized volatility has generally been higher compared to DUK and SO. In Q4 2023, NEE's volatility reached 54.19%, while DUK's was 21.93% and SO's was 22.99%. This suggests that NEE's stock price experiences more significant fluctuations, making it a riskier investment.
  • NEE experienced a maximum drawdown of -44.97% on 2023-10-09, which is significantly larger than the maximum drawdowns of DUK at -24.16% on 2022-10-12 and SO at -23.28% on 2022-10-12. This indicates that NEE is subject to more substantial declines from peak values compared to its peers, further highlighting its higher risk profile.

• Risk-Adjusted Performance:

  • The Sharpe ratios for DUK and SO are generally higher compared to NEE, indicating that DUK and SO have provided better risk-adjusted returns over the analyzed period. For example, in Q1 2022, NEE's Sharpe ratio ranged from 0.69 to 0.81, while DUK ranged from 1.12 to 1.36 and SO ranged from 1.17 to 1.41.
  • The beta values for NEE, DUK, and SO have generally remained below 1, indicating that these stocks are less volatile than the market. However, NEE generally has a higher beta compared to its peers, suggesting that it is slightly more sensitive to market movements.

• Overall Assessment:

  • Based on the analysis, NextEra Energy, Inc. (NEE) has underperformed Duke Energy Corp. (DUK) and The Southern Co. (SO) in terms of historical performance, annualized returns, and risk-adjusted returns. NEE also exhibits higher volatility and larger drawdowns compared to its peers, indicating a higher risk profile. While all three companies have beta values below 1, NEE's beta is generally higher, suggesting it is more sensitive to market movements.
  • A significant trend is NEE's higher volatility and larger drawdowns compared to DUK and SO. This could be due to NEE's focus on renewable energy, which may be subject to greater market uncertainty and regulatory changes compared to traditional utilities.

Peers Fundamentals(as of 2024-12-31)

1. Market Position and Size:

   • NextEra Energy (NEE) has the largest market capitalization among its peers, Duke Energy (DUK) and The Southern Co. (SO), with a market cap of 142717.0 compared to DUK's 89930.6 and SO's 96836.5.
   • Despite having a lower revenue of 24406 million compared to DUK's 30357 million and SO's 26724 million, NEE boasts a significantly higher net income of 6945 million compared to DUK's 4514 million and SO's 4401 million.
   • This indicates that NEE is more efficient in converting revenue into profit, solidifying its leading market position despite not having the highest revenue.

2. Profitability and Efficiency:

   • NEE demonstrates superior profitability margins compared to its peers and the industry average. Its gross profit margin is 37.11%, EBITDA margin is 51.39%, and net profit margin is 28.46%.
   • In comparison, DUK has a gross profit margin of 30.98%, EBITDA margin of 45.23%, and net profit margin of 14.87%, while SO has a gross profit margin of 31.49%, EBITDA margin of 45.41%, and net profit margin of 16.47%.
   • The industry averages are 27.51% for gross profit margin, 32.81% for EBITDA margin, and 4.27% for net profit margin. NEE's higher margins indicate better operational efficiency and cost management.

3. Financial Health and Stability:

   • NEE's liquidity ratios, such as the current ratio (0.47) and quick ratio (0.38), are lower than its peers (DUK and SO both have a current ratio of 0.67, and quick ratios of 0.44 and 0.46 respectively) and the industry average (1.29 and 1.12 respectively), suggesting potential short-term liquidity challenges.
   • NEE's total debt to total equity ratio is 165.11, which is less than DUK (170.03) and SO (199.58), but slightly above the industry average (162.49).
   • Its debt/EBITDA ratio is 6.56, which is higher than SO (5.34) but lower than DUK (6.14) and the industry average (6.85). Overall, NEE's financial health is stable, but its liquidity position warrants monitoring.

4. Valuation and Market Perception:

   • NEE's valuation metrics are higher than its peers and industry averages, indicating a premium market perception. Its enterprise value to sales is 9.82, and enterprise value to EBITDA is 19.08, compared to the industry averages of 6.0 and 13.51, respectively.
   • NEE's price-to-earnings ratio is 20.57, price-to-book ratio is 2.85, and price-to-sales ratio is 5.85.
   • This suggests that the market has high expectations for NEE's future growth and profitability.

5. Cash Flow and Capital Management:

   • NEE exhibits strong cash flow generation, with a net operating cash flow of 13260 million and a free cash flow of 4746 million.
   • In comparison, DUK has a net operating cash flow of 12284 million, and SO has a net operating cash flow of 9788 million and a free cash flow of 201 million.
   • NEE's total capital expenditure is 8514 million, which is less than SO's 9587 million. This indicates efficient capital management and strong cash flow generation capabilities.

6. Growth and Future Prospect:

   • NEE's year-over-year revenue growth (26.91%) and EBITDA growth (76.64%) significantly outperform the peer averages (6.35% and 10.59%, respectively).
   • However, NEE's net income growth (-4.99%) and basic earnings per share growth (-6.43%) underperform the peer averages (15.75% and 15.94%, respectively).
   • NEE's 3-year CAGR for sales/revenue (4.7%) is less than its 5-year CAGR (6.89%), indicating a recent slowdown in revenue growth.
   • NEE's 3-year CAGR for net income (24.8%) is greater than its 5-year CAGR (13.01%), indicating an acceleration in net income growth. Overall, NEE's future prospects appear positive, driven by strong revenue and EBITDA growth.

7. Potential for Investment:

   • NEE presents a mixed investment case. Its strengths include superior profitability margins, strong cash flow generation, and high returns on invested capital.
   • However, its weaknesses include weaker liquidity ratios and a high valuation.
   • Investors should carefully weigh these factors and consider their risk tolerance before investing in NEE.

8. Key Risks and Considerations:

   • NEE's weaker liquidity position poses a risk, as it may face challenges in meeting its short-term obligations.
   • Its high valuation suggests that the market has priced in significant future growth, which may not materialize.
   • Changes in regulatory policies and market conditions could also impact NEE's financial performance.

9. Overall Assessment:

   • NextEra Energy (NEE) is a financially strong company with a leading market position and superior profitability.
   • However, its weaker liquidity position and high valuation warrant caution.
   • Overall, NEE is well-positioned for future growth, but investors should carefully monitor its financial performance and market conditions.