NextEra Vs. Brookfield: Which Renewable Energy Stock Is A Better Buy?

windmill on grass field during golden hour

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After a stellar rise in 2020, stocks in the renewable energy space have lost momentum this year. Investor concerns around valuations and a rise in interest rates have contributed to a broader market sell-off in 2021.

Two renewable energy stocks that have managed to generate outsized returns for investors over the long term are NextEra Energy (NEE) and Brookfield Renewable Partners (BEP). Both these stocks have trailed the market this year, however. While NextEra is down 10.4% this year, Brookfield Renewables has lost close to 20% in 2021.

So, let’s take a detailed look at these two companies’  business models to ascertain which is the better contrarian bet currently.

The bull case for NextEra Energy

NextEra Energy provides electricity-related services. Its primary subsidiary is FPL (Florida Power & Light), which is a rate-regulated utility engaged in the generation, distribution, and sale of electric energy. In the first quarter of 2021, the company reported $1.33 billion in adjusted earnings or $0.67 per share. This represented a 14%  increase year over year. Its  FPL subsidiary is the largest rate-regulated utility provider in the U.S. and grew its bottom-line by 12% in Q1.

According to the company’s earnings call, NextEra spent $1.4 billion in the March quarter to expand and modernize operations. It completed approximately 300 MWs (megawatts) of solar projects in Q1 and is now the leader in solar energy capacity in the country.

NextEra expects earnings of  $2.40 – $2.54 in 2021, which indicates 7% year-over-year growth. In 2022, it expects earnings between $2.55 and $2.75, while in 2023 its bottom-line is estimated at between $2.77 – $2.97 per share. This improvement in earnings should help support NextEra’s goal of increasing its dividend payouts by 10% annually through 2022.

NextEra already has one the largest renewable energy portfolios in the world and operated 22 GWs of wind and solar assets at the end of 2021. It now has close to 16 GWs of backlog contracts that will drive top-line growth in 2021 and beyond.

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