Nextera Energy Partners Initiated with a Buy at Credit Suisse

By Jason Carr

Nextera Energy Partners (NYSE: NEP) received a Buy rating and a $33 price target from Credit Suisse analyst Maheep Mandloi yesterday. The company’s shares opened today at $25.34.

Mandloi said:

“We initiate coverage of NextEra Energy Partners (NEE Partners) with an Outperform rating and a $33 target price. We see compelling upside from best-in-class dividend growth visibility, improving acquisitions returns, and near-term capital structure flexibility. Leader of the Pack: We view NEE Partners as the premier vehicle in the YieldCo sector to finance the acquisition of long-term and heavily contracted cash flows. Investments primarily in renewable energy assets provide attractive dividend growth for shareholders. Growth visibility is driven by over $2 billion in EBITDA originated by its parent company NextEra Energy and available for dropdown to NEE Partners at increasingly attractive returns. A Plethora of Catalysts to Unlock Value: These include (1) 1Q17 dropdowns at attractive returns and requiring limited equity, (2) NET pipeline expansion update (February 2017), (3) PTC repowering opportunities for wind PPA projects and development of NextEra Energy’s wind and solar pipeline, and (4) growth opportunities in contracted energy storage assets. Risks: The following represent risks to our Outperform rating: (1) rising interest rates, (2) asset performance, (3) capital market needs and access, and (4) relative cost of capital disadvantage given IDR splits. Valuation: We project an above-consensus dividend CAGR of 16% through 2020 and believe NEP’s growth prospects at the end of our forecast period will be comparable with today. Our dividend yield based valuation methodology reflects that view.”

According to TipRanks.com, Mandloi is a 1-star analyst with an average return of -5.5% and a 62.5% success rate. Mandloi covers the Technology sector, focusing on stocks such as SunEdison Inc, Vivint Solar, and First Solar.

Nextera Energy Partners has an analyst consensus of Strong Buy, with a price target consensus of $34.

Based on Nextera Energy Partners’ latest earnings report for the quarter ending September 30, the company posted quarterly revenue of $186 million and quarterly net profit of $27 million. In comparison, last year the company earned revenue of $103 million and had a net profit of $1 million.

NextEra Energy Partners LP acquires, manages and owns contracted clean energy projects with long-term cash flows. It owns interests in wind and solar projects in North America, as well as natural gas infrastructure assets in Texas. The company was founded on March 6, 2014 and is headquartered in Juno Beach, FL.