FPL GROUP INC. $57 - New York symbol FPL

FPL GROUP INC. $57 (New York symbol FPL; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 410.8 million; Market cap: $23.4 billion; Price-to-sales ratio: 1.4; WSSF Rating: Average) gets 70% of its revenue from wholly owned Florida Power and Light Co., a regulated utility with 4.5 million customers in eastern and southern Florida. FPL Group is also a leading producer of wind power. Its NextEra Energy Resources, subsidiary accounts for 25% of the U.S.’s wind-power capacity. NextEra also operates unregulated electrical-power plants in 25 states and Canada. It sells its power to wholesale customers, not individuals. In the three months ended June 30, 2009, FPL Group’s earnings rose 6.9%, to $400 million, or $0.99 a share, from $375 million, These figures do not include a charge the company incurred for losses on the hedging contracts it uses to lock in the price of fuel. FPL Group’s revenue rose 6.3%, to $3.8 billion from $3.6 billion. NextEra started up a number of new wind-power projects during the quarter; this increased its windpower capacity by 9%, and helped push up its earnings by $48 million. The new projects helped offset lower power output at its existing facilities due to lighter-than-normal winds. NextEra’s revenue rose 37.4% in the quarter. Earnings at the company’s Florida utility fell by $4 million, as the weak housing market led to more foreclosures. In turn, these cut the average number of customers by 16,000 or 0.4%. As well, electricity usage per customer fell 2.5%. All of these factors contributed to a 0.2% revenue drop at this division. FPL Group feels it will earn $4.20 to $4.40 a share this year. The stock trades at a reasonable 13.3 times the midpoint of this range. FPL Group also predicts that its 2010 earnings will rise to between $4.65 a share and $5.05 a share, as it continues to expand its wind-power capacity. Using the midpoint of this range gives the stock a p/e ratio of 11.8. The $1.89 dividend yields 3.3%. FPL Group is a buy.

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