NextEra Energy Inc. (NEE) announced first-quarter 2011 operating earnings of 94 cents per share, at par with the year-ago quarter. The results of the company fell below the Zacks Consensus Estimate, as provided by 12 coverings analysts, by 2 cents.

NextEra Energy recorded GAAP earnings for the first quarter of 2011 of 64 cents per share compared with $1.36 per share in the year-ago period. The difference of 30 cents between operating and GAAP earnings, during the first quarter, was due to mark-to-market effects of non-qualifying hedges and other than temporary impairments on certain investments, both of which relate to NextEra Energy Resources.

Total Revenue

NextEra Energy’s total operating revenue for first-quarter 2011 was $3.1 billion, down 13.5% from $3.6 billion reported in the year-ago period. Uninspiring performance at Florida Power & Light and NextEra Energy Resources led to the year-on-year fall in revenue.

Reported quarter revenue also missed the Zacks Consensus Estimate of $3.46 billion.

Segment Results

FloridaPower & Light: Total segment revenue for first-quarter 2011 was $2.2 billion versus $2.3 billion in first-quarter 2010, reflecting a decline of 3.5%. Total energy sales during the current quarter were 22,400 million kilowatt/hr (KWh) compared with 23,859 million KWh in first-quarter 2010.

Despite a year-over-year growth in customer base by 30,000 and an increase in average KWh price by $1.72, the revenue contribution from this segment failed to measure up because of a 12.4% reduction in energy sales to residential consumers.

NextEra Energy Resources: Total revenue for first-quarter 2011 was $0.8 billion versus $1.2 billion in first-quarter 2010, reflecting a decline of 33.2%.. Reported quarter revenue faltered as contribution from new assets remained flat over the prior year.

Corporate and Other: Total revenue for first-quarter 2011 was $55 million versus $47 million in first-quarter 2010, increasing 17.0%.

Operational Update

Total operating expenses during the quarter increased by 0.9% year over year. The increase in operating expenses was primarily owing to a 4.1% year-over-year rise in input costs, accompanied by a 5.2% increase in other operation and maintenance cost, offset by a 20% decline in depreciation and amortization expenses.

The increase in operating cost as well as decrease in the total revenue in the reported quarter affected the operating income of the company, which plummeted by 54.4% to $428 million from $939 million in the prior-year quarter.

Interest expenses in the first quarter swelled by 6.7% to $254 million from $238 million at the end of first quarter 2010, sparked off by a higher debt level.

Financial Update

The company continues to have a strong cash balance. Cash and cash equivalents as of March 31, 2011, were $425 million, up 40.7% from $302 million as of December 31, 2010.

Long-term debts of the company as of March 31, 2011, were $18.3 billion versus $18 billion as of December 31, 2010. The debt-to-equity ratio at the end of the first quarter 2011 was 47%, deteriorating from 44% at the end of 2010, mainly due to the issue of new debts in the quarter under review.

Outlook

NextEra Energy upgraded its 2011 earnings guidance to a range of $4.35 to $4.65 per from the prior range of $4.25 to $4.55 per share. The 10 cent hike was due to changes in the assumption of estimated useful life for a portion of the company’s wind fleet.

NextEra expects earnings to grow at an average rate of 5% to 7% from 2011 through 2014.

Our View

Despite the earnings and top-line miss, we appreciate the initiatives employed by NextEra Energy for furthering renewable energy generation.

During the quarter NextEra Energy developed the world’s very first hybrid solar power unit, the Martin Next Generation Solar Energy Center. This new solar project will lower the consumption of fossil fuels by 41 billion cubic feet of natural gas and more than 600,000 barrels of oil, which in turn will reduce the emission of 2.75 million tons of greenhouse gas over the lifetime of the facility.

During the quarter the company signed a power purchase agreement to add 400 megawatt (MW) of wind power in its generation portfolio. The company expects to enhance its wind generation by 1400-2000 MW within 2012.

NextEra Energy’s peer Progress Energy Inc. (PGN) has also worked considerably to develop its alternate energy generation portfolio. The latter also assisted its consumers to use energy efficiently and effectively, which helped in saving power worth 243 million kilowatt hours through out the Carolinas and Florida.

NextEra Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock.

Based in Juno Beach, Florida, NextEra Energy Inc., through its subsidiaries, engages in the generation, transmission, distribution and sale of electric energy in Florida.

 
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