Goldman Sachs has published a research report indicating that NextEra Energy (NEE.US) management recently raised the company's profit growth forecast. The report also suggests that new business areas, such as data centers and renewable energy partnerships, are expected to unlock long-term growth potential. Based on these positive signals, Goldman Sachs maintains its "Buy" rating on this US energy giant with a 12-month price target of $94.
In its latest research report, Goldman Sachs noted that NextEra Energy's management updated its performance guidance during a recent event, projecting an average annual earnings per share (EPS) growth rate exceeding 8% through 2032. This growth expectation is primarily supported by electrification trends and large-scale load demand.
The company also revealed that within its 77-108 gigawatt resource development pipeline, there exists an incremental capital expenditure opportunity of $60 billion to $90 billion, equivalent to 20%-30% of the current plan. If these investments materialize, they will further accelerate EPS growth.
Furthermore, Chief Financial Officer Mike Dunne highlighted the expansion of the data center business, stating that the company's subsidiary, Florida Power & Light (FPL), has received approval for a data center electricity pricing plan and has three potential data center sites, which are expected to become significant growth drivers.
Additionally, the company continues to advance its transmission projects, with related regulated capital projected to grow at a 20% compound annual growth rate through 2032. Dunne also emphasized that the company leverages its scale advantage (having employed approximately 140,000 construction workers last year) to mitigate supply chain and labor pressures.
In renewable energy, the company stated it has ample interconnection capacity for its projects and possesses dispatch flexibility. While natural gas supply faces constraints, the partnership with Comstock is expected to facilitate natural gas flow by 2027.
In the nuclear sector, the company is optimistic about the development of third-generation small modular reactor technology over the next 5-10 years and anticipates a subsequent transition to fourth-generation technology. Moreover, some wind power purchase agreements signed in the mid-2010s are at low prices of around $15–18 per megawatt-hour, and future recontracting could potentially lead to revenue enhancements.
Finally, NextEra Energy's management stated that the company is well-positioned to actively capitalize on data center opportunities and navigate the Inflation Reduction Act (IRA) tax credits and the Focused Entity of Concern (FEOC) regulations. The company plans to offer comprehensive solutions to hyperscale customers through strategic land positioning, fair electricity pricing structures, rapid deployment of battery storage (targeting 5-6 gigawatts annually), and a localized supply chain, while also utilizing the localized supply chain to meet FEOC compliance requirements.
Furthermore, the partnership with Google (GOOGL.US) is expected to help reduce costs through data analysis and artificial intelligence initiatives. Revenue from this collaboration is not included in current performance forecasts and could represent an additional growth avenue.
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