In the world of mega-caps, there is an ongoing watch by investors as to which companies may become among the next to reach $100 billion in equity market value. It turns out that the S&P 500 currently has about 50 companies that are worth more than $100 billion. Of the 28 utilities counted in the S&P 500 index, not a single one has a market cap of $100 billion or more.

NextEra Energy Inc. (NYSE: NEE) is the largest utility in America when measured by its market capitalization. Its market cap was $87 billion on last look, which would require a 15% gain to reach the $100 billion mega-cap club. Independent research firm Argus believes that NextEra Energy has more upside to go. The firm has a Buy rating, and on Monday it raised its price target to $200 from $190.

While this call does not automatically generate a $100 billion market value in the next 12 months, it would put NextEra Energy within striking distance of being worth that much. The firm sees new growth opportunities at the non-regulated NextEra Energy Resources business and at the limited partnership, NextEra Energy Partners L.P. (NYSE: NEP), as contributing to its earnings growth and supporting its dividend.

On top of the price target hike, Argus raised its 2019 earnings per share estimate to $8.37 from $8.32 based on continued capacity additions. The firm also set its 2020 estimate at $9.06 per share. What matters the most here is the longer-term view, and Argus put its five-year earnings growth rate forecast at 7%.

NextEra’s market cap values the company at 21.8 times the analyst’s 2019 earnings estimate. That is a premium to the peer group and would not be considered “cheap” among utility screens. Argus believes that a premium valuation is warranted given the company’s prospects for above-average earnings and dividend growth.

Also worth noting is that NextEra Energy’s common dividend yield is just over 2.4%. If you back out two of the troubled or low-yields of the 28 utilities in the S&P 500, the median yield is up at 3.2%.

Argus sees NextEra Energy as a combination of a successful regulated utility with a faster-growing renewables business with a solid record of dividend increases. It is also shown to be targeting a payout ratio of 65%, with projected dividend growth of 12% to 14% from 2017 through 2023.

Additional positives are seen around solid earnings growth from Florida Power & Light as the economy strengthens and the rate base expands and NextEra Energy Resources continues to increase its investment in renewables. The company is also expected to reduce its risk through new contracts and balance sheet improvements, and the firm expects management to maintain its focus on shareholder and customer value.

The adjusted profit margin in the fourth quarter of 2018 of 15.2% was shown to be in line with peers. NextEra generated $6.6 billion in cash from operations in 2018, which would cover 51% of capital expenditures, versus $6.5 billion and 60%, respectively, in 2017.

Argus also talked up specifics around the renewable energy sector, as well as some acquisition activity:

During the fourth quarter, Florida Power & Light (FPL) continued construction on a range of solar projects, including the 1,750-MW Okeechobee Clean Energy Center, a natural-gas-fueled plant, which is expected to begin operating in mid-2019. Management also announced a plan to install 30 million solar panels by 2030. In addition, the $900 billion, 1,200-MW Dania Beach Clean Energy Center received regulatory approval to begin operation in 2022. The project is expected to reduce emissions by 70% relative to the existing power plant.

In December, FPL completed the acquisition of Vero Beach’s municipal electric system, which serves 35,000 customers in Central Florida. In January, NEE purchased Gulf Power, an electric utility serving 428,000 customers, from Southern Co. Lastly, NextEra Energy Transmission agreed to acquire Trans Bay Cable, a 53-mile underwater transmission cable system, which provides 40% of San Francisco’s electrical power, for $1.0 billion. The deal is expected to close later this year.

To show just how much larger Next Era Energy is compared to other large utilities, note that the utilities-sector SPDR exchange traded funds shows the top six weightings as follows: NextEra Energy (11.89%), Duke Energy (8.75%), Dominion Energy (7.58%), Southern Company (6.87%), Exelon (6.27%) and American Electric Power (5.36%).

The highest analyst call for Next Era Energy comes from Guggenheim and its $205 price target. The consensus analyst target from Thomson Reuters is $188.47.

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