NRG vs. NEE: Which U.S. Power Stock Has Better Investment Potential?
The companies operating in the Zacks Utility – Electric Power sector offer a compelling investment case, underpinned by consistent cash flows and the reliability of regulated business models. Many utilities with a domestic focus operate under long-term power purchase agreements, providing insulation from broader economic volatility. As electricity demand continues to grow and sustained capital investments drive operational efficiency, these companies are well-positioned to deliver stable earnings and maintain dependable dividend payouts.
The Electric Power industry is undergoing a transformative shift toward cleaner energy sources. Utilities are increasingly allocating capital toward renewable infrastructure, including solar, wind, nuclear, battery storage and grid modernization. In response to accelerating global decarbonization efforts, early adopters of low-carbon technologies are gaining a strategic advantage. These forward-looking utilities not only mitigate risks associated with fuel price swings but also enhance their investment appeal to both institutional and retail investors. In the evolving electric power market, let's focus and compare NextEra Energy NEE and NRG Energy NRG. Both are major U.S. energy companies in the electric utilities and power generation industry, competing in clean energy, grid operations and wholesale electricity markets.
NextEra Energy stands out as a premier clean energy investment, offering a strong blend of growth and stability. Its regulated utility subsidiary, Florida Power & Light, is the largest in the U.S. and provides predictable cash flows through a stable, rate-regulated model. NextEra's subsidiary NextEra Energy Resources is the world's largest generator of wind and solar energy, driving long-term growth through clean energy projects and battery storage. NEE's strategic focus on decarbonization, supported by disciplined capital allocation and strong ESG credentials, positions it well for continued outperformance in a transitioning energy landscape.
NRG Energy presents a compelling investment case with its integrated power model and commitment to decarbonization. The company secures steady cash flows through its retail electricity operations while pursuing ambitious sustainability targets, including net-zero emissions by 2050. Strategic moves like portfolio streamlining and investments in clean energy improve efficiency and support long-term growth. By maintaining a balanced energy mix of traditional and renewable sources, NRG is well-positioned to capitalize on market stability and the momentum of the global energy transition.
Both companies mentioned above are strong operators in the Zacks Utilities sector; a closer examination of their fundamentals is essential. A comprehensive comparison will provide valuable insight into which stock presents a more compelling investment opportunity for investors.
NRG & NEE's Earnings Growth Projections
The Zacks Consensus Estimate for NRG Energy's earnings per share in 2025 and 2026 has increased by 2.78% and 9.12%, respectively, in the past 60 days. Long-term (three to five years) earnings growth per share is pegged at 16.2%.
The Zacks Consensus Estimate for NextEra Energy's earnings per share in 2025 has gone down by 0.27% in the past 60 days, and 2026 earnings per share has remained unchanged in the same time period. Long-term earnings growth per share is pegged at 6.55%.
NRG & NEE's Dividend Yield
Dividends are regular payments made by a company to its shareholders and represent a direct way for investors to earn a return on their investment. They are an important indicator of a company's financial health and stability, often signaling strong cash flow and consistent earnings. Utilities are known for regular dividend payments to their shareholders.
Currently, the dividend yield for NextEra Energy is 3.22%, while the same for NRG Energy is 1.15%. The dividend yields of both companies are lower than their industry's yield of 3.33%.
Return on Equity (ROE)
ROE is an essential financial indicator that evaluates a company's efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value.
NRG's current ROE is 73.78% compared with NEE's ROE of 12.06%. NRG outperforms the industry's ROE of 10.09%.
Debt to Capital
The Utilities sector is a capital-intensive one, and huge investments are required at regular intervals to upgrade, maintain and expand operations. The usage of new evolving technology also requires investments. Therefore, utilities borrow from the market and add it to their internal cash generation to fund their long-term investments.
NRG Energy's debt-to-capital currently stands at 79.56% compared with NextEra Energy's debt-to-capital of 59.79%. NEE's debt level is a tad lower than he industry's debt-to-capital, which stands at 60.81%.
Valuation
NRG Energy currently appears to be trading at a slightly higher premium compared with NextEra Energy on a Price/Earnings Forward 12-month basis. (P/E- F12M).
NRG is currently trading at 18.81X, while NEE is trading at 18.06X compared with the industry's 15.1X.
Price Performance
NRG Energy's shares have gained 69.7% in the past three months compared with NextEra Energy's rally of 0.7% and the industry's return of 1.6%.
Price Performance (Three months)
Conclusion
NRG Energy and NextEra Energy are investing steadily in their infrastructure to serve customers more efficiently.
NRG currently has a VGM Score of A compared with NEE's score of C. NRG's score indicates a better growth forecast, promising momentum and attractive value compared with NEE. In addition, NRG's higher ROE and increasing earnings estimates make it a better choice in the utility space.
Based on the above discussion, NRG Energy currently has a marginal edge over NextEra Energy, despite the stocks carrying a Zacks Rank #3 (Hold) each. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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