This Is the First Energy Stock I Plan to Buy in June (Hint: It’s Not ExxonMobil)

I’m a big fan of oil giant ExxonMobil (NYSE: XOM). I’m impressed by the oil giant’s industry-leading performance over the past several years. Exxon has arguably built the best oil company in the world, with a world-class resource portfolio and fortress balance sheet. I think Exxon has a very bright future, fueled by its continued investments in growing its oil and gas production and by its expansion into several new, lower-carbon energy businesses.

Despite all that, I don’t currently own any ExxonMobil stock, nor do I plan to add it to my portfolio this June. Instead, the first energy stock I plan to buy in the coming month is NextEra Energy (NYSE: NEE). Here’s why.

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The ExxonMobil of the new era

ExxonMobil is currently the largest U.S. energy company by market cap. That scale gives it significant competitive advantages. The oil giant can optimize its supply chain, capture cost synergies, and deploy proprietary technologies to create greater shareholder value.

NextEra Energy wants to be the ExxonMobil of the utility sector. It’s already the largest U.S. utility by enterprise value at over $300 billion. However, it’s about to get even bigger. NextEra Energy recently agreed to combine with Dominion Energy (NYSE: D) in a $67 billion deal. The transaction will create the world’s largest regulated electric utility and North America’s premier energy infrastructure platform. The combined company will service 10 million utility customers across four of the country’s fastest-growing states. It will also be the world’s largest renewable energy producer and battery storage operator, the top U.S. gas power producer, and the second-largest nuclear energy producer. The larger scale will enable NextEra Energy to buy, build, finance, and operate more efficiently.

The company’s larger scale will also put it in a stronger position to capitalize on the growth ahead for the U.S. power sector. Forecasters expect U.S. electricity demand to grow by 60% over the next 20 years. That’s six times faster than it grew over the last two decades, powered by AI data centers, electric vehicles, and advanced manufacturing.

An accelerant to an already strong growth plan

NextEra Energy had already expected to grow briskly in the coming years. The utility estimated that it could grow its adjusted earnings per share by more than 8% annually through 2032, driven by growth in its electric utility in Florida and by investments to continue building out energy infrastructure across the U.S. to support rising demand for cleaner energy.

Buying Dominion Energy will enable NextEra Energy to grow even faster. It now expects to grow its earnings at a rate of more than 9% annually through 2032. That’s due to the greater scale advantages of the combined company and to the growth in data center power demand across Dominion’s operating area. Dominion operates electric utilities in Virginia, North Carolina, and South Carolina. Virginia is a major regional data center hub. Data centers in the state will need more than 33 gigawatts (GW) of grid power by 2030, double this year’s level. The larger NextEra Energy will be in a better position to capitalize on this surge in demand in the state because it can develop power-generating capacity more efficiently than its rivals.

The must-own energy stock for the AI era

I think ExxonMobil is a great energy stock. However, I believe NextEra Energy is becoming the ExxonMobil of the new AI era. That’s why I plan to make it the first energy stock I buy this June. I think it can generate powerful total returns over the long term by capitalizing on surging power demand in the U.S.

Should you buy stock in NextEra Energy right now?

Before you buy stock in NextEra Energy, consider this:

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Matt DiLallo has positions in NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

This Is the First Energy Stock I Plan to Buy in June (Hint: It’s Not ExxonMobil) was originally published by The Motley Fool