NextEra Energy Partners cut at Guggenheim after ‘lackluster’ Q3 results

NextEra Energy Partners (NYSE:NEP) -3.2% in Monday’s trading to near a 52-week low as Guggenheim downgrades units to Neutral from Buy with a $22 price target, slashed from $37, citing last week’s “lackluster” earnings report “with management messaging seemingly pointing to throwing in the towel on the yieldco model.”

Guggenheim’s Shahriar Pourreza points to management commentary about a functional separation of NextEra Partners (NEP) and NextEra Energy (NEE) and a “reconsideration” of the NEP strategy, and the alternatives for CEPF resolution clearly have narrowed.

The analyst says the lack of capital market reprieves – and even reversion from mid-summer softening – leaves NextEra Partners (NEP) “disadvantaged as a yield-tied stock,” and management commentary around a lack of private market backstops and public equity valuation “removes opportunities for accretive growth financing and CEPF refinancing.”

The optics of a dividend policy shift from high payout to low payout may cause further investor rotation, the analyst also says.

Last week, parent NextEra Energy (NEE) reported better than expected Q3 earnings while NextEra Partners (NEP) results disappointed.