Fall Button Down vs. NextEra Stock

In this article I’ll evaluate whether a terracotta Fall button down sweater with a retail price of $52.00 or NextEra, Inc. (NEE) stock currently trading at a price of $51.96 represents the better buy.

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Fall Button Down - $52.00

I recently purchased this button down shirt:

And I’m seriously IN LOVE with it! The ribbed fabric is undeniably soft. Also, it’s lightweight. I also love the color! It’s perfect for fall and pairs well with jeans or leggings.

Plus, you can easily dress it up by wearing it with booties or keep it casual by pairing it with sneakers. It’s also a great transition piece as we go from the warmer summer months to the crisp autumn air.

This button down retails for a price of $52.00. Get yours today! And use my exclusive code: October20 to receive 20% off your order at checkout!

Not quite for you? Also, shop other button down sweater options available at the Pink Lily Boutique.

NextEra Energy Inc. (NEE) Stock - $51.96

Company Profile

NextEra Energy was initially founded in 1925 and is headquartered in Juno Beach, Florida. NextEra Energy is among the largest electric power and energy infrastructure companies in North America and is a leader in the renewable energy space, according to the company’s 10K report. The company has two principal businesses: FPL and NEER. FPL is one of the largest electric utilities in the U.S. and the largest in the state of Florida. Alternatively, NEER is the world’s largest generator of renewable energy from wind and sun, as well as a world leader in battery storage.

As of October 22, 2023, the date this article was written, the company has a total market capitalization of $105.15 billion. 2.02 billion shares are outstanding and 76.08% of those shares are owned by institutions.

As for NEE’s key ratios, the company has a trailing 12 months P/E ratio of 12.86, a P/B ratio of 2.52, a profit margin of 38.03%, and a total debt to capital ratio of 56.57%. The company also pays a quarterly dividend of $0.4675 per share.

Now, let’s dive into some good old-fashioned financial statement analysis by turning to NextEra Energy’s most recent set of financial statements: the 2nd quarter 10Q report, dated June 30, 2023.

Income Statement Analysis

For the six months ended June 30, 2023, operating revenues and total net income were approximately $14.1 billion and $4.9 billion, respectively. For the six months ended June 30, 2022, operating revenues and total net income were approximately $8.1 billion and $0.9 billion, respectively. This represents a year-over-year increase of 74.1% in operating income and 444.4% in total revenues.

So what’s driving that growth? To uncover an answer to this question, you have to read through the section in the 10Q report called, “Management’s Discussion and Analysis of Financial Condition and Results of Operation”.

FPL Net Income Growth

According to NEE company management, FPL’s increase in revenues and net income was attributable to continued investments in plant in service and other property. For a company like NextEra Energy, more infrastructure translates into increased profit potential. And as an investor, hearing that the company is continually investing and earning higher profits is a REALLY good reason to invest in a company.

NEER Net Income Growth

Alternatively, at NEER, the growth in revenues and net income was driven by favorable non-qualifying hedge activity compared to 2022, lower impairment charges on the Mountain Valley Pipeline investment, changes in the fair value of equity securities in NEER’s nuclear decommissioning funds, and higher earnings from both new investments and a segment of business called customer supply and proprietary power and gas trading.

Image by: NextEra Energy, Inc.

Looking at this snippet from the company’s 10Q, you’ll notice the main driver is the favorable change in non-qualifying hedge activity. It accounts for $3.0 billion of the $4.3 billion increase in NEER revenues for the six months ended June 30, 2022 to June 30, 2023. This is a huge bummer as an investor! Profits (or losses) from hedging activities can fluctuate depending on the economic environment. So, with that said, it’s very possible we could see NEER profit drop back down in coming months.

Balance Sheet Analysis

Can you guess what NextEra Energy’s largest asset is as of June 30, 2023? If you guessed property, plant, and equipment, you’re spot on! This is exactly what I’d expect to see for a utility company. More infrastructure directly translates into more customer accounts, which translates into higher profit potential. Of the $168.3 billion in total assets reporting as of June 30, 2023, $117.7 billion was property, plant, and equipment. That’s almost 70% of NEE’s total assets.

Long-term debt of approximately $61 billion represents the company’s largest liability and it makes up 53.5% of the company’s total liabilities.

Overall, I would argue that the company’s balance sheet looks healthy.

Statement of Cash Flow Analysis

Now, let’s turn our attention to the company’s statement of cash flows. For the six months ended June 30, 2023, cash decreased by $687 million. This left $2.754 billion in cash and cash equivalents at June 30, 2023.

The reason for the decrease in cash is due to investing activities, which ate up $12.8 billion during the six months ended June 30, 2023. From my perspective this is great! No company would be dumping out all this cash in investments if they didn’t intend to receive some sort of payoff from it. This cash outlay in investments may be a sign that NextEra Energy is looking to grow.

Concluding Remarks on NEE

Based on my financial statement analysis, NextEra Energy appears to be a stable investment option for investors seeking to collect dividends. Although there is some growth due to continued investments, it’s important not to get too swept up in the drastic year-over-year increase in revenues and profits, since a large portion of the year over year increase is related to hedging activities. And as I said above, hedging activities are susceptible to dramatic swings based on the economic environment.

Overall, however, I do think NextEra Energy will continue to perform well and be a source of consistent, stable growth for investors, especially as we seek to further reduce our environmental footprint with renewable technologies. And with the stock price valuation looking reasonable, now might be the right time to invest.

Decision Time: Fall Button Down or NextEra Energy?

If you had to decide between the terracotta Fall button down or one share of NextEra Energy, Inc. stock, which would you choose and why?

If you’d like to purchase the terracotta Fall button down shirt, please use this link. Also, don’t forget to use my code October20 to receive 20% your order at checkout.

If you’d rather purchase NextEra Energy, Inc. stock, but don’t know how to get started investing, check out my FAQ page. It’s loaded with all sorts of helpful tips!

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* Ratios and financial metrics provided by Fidelity as of 10/22/2023, the date this article was written.

* Please review our Investment Disclaimer Policy. The Chic Capitalist is committed to providing independent equity research. At the time of publication, The Chic Capitalist and its affiliates do not own a direct financial interest in the aforementioned stock.

Fall Button Down vs. NextEra Energy Inc. (NEE)

Fall Button Down - $52.00