Energy utility, Wisconsin Energy Corporation (WEC) reported net operating earnings of 41 cents per share for the second quarter of 2011, significantly beating the Zacks Consensus Estimate of 39 cents and well above the year-ago quarter's operating earnings of 37 cents.
Wisconsin Energy’s better-than-expected quarterly results came on the back of additional income from its ‘Power the Future’ plan, offset slightly by mild weather during the period.
Total Revenue
Wisconsin Energy's total revenue of $992 million in the second quarter of 2011 showed 11.3% growth from $891 million in the year-ago comparable period. Quarterly revenue, however, fell short of the Zacks Consensus Estimate of $1.01 billion.
Operating Highlights
Retail electricity sales at Wisconsin Energy showed a year-over-year decline of 1.2% in the second quarter of 2011. The decline in electricity consumption during the quarter was mainly due to mild weather and lack of air conditioning demand during June, which pulled down sales to residential, and small commercial and industrial customers by 3%.
However, this was slightly made up by a 1.8% rise in electricity sales to large commercial and industrial customers.
Though the retail electric sales were disappointing for the quarter, revenues were boosted by the increase in customer accounts. At the close of the second quarter, Wisconsin Energy was bestowed with 2,000 more electric customers and 4,000 more natural gas customers than last year.
Total operating expenses of Wisconsin Energy increased by 5.5% to $1,033.1 million mainly due to a 10.7% increase in fuel and purchased costs, 27.1% rise in cost of gas sold and a 7.2% surge in depreciation and amortization expenses, offset partially by a 5.9% decline in operation and maintenance expenses.
Despite the rise in operating expenses, the company’s operating results benefited from the robust revenue growth during the quarter. Operating income during the second quarter was $174.4 million versus $163.3 million in the year-earlier quarter, reflecting a growth of 6.8%.
Net interest expenses of the company in the quarter were $57.4 million versus $53.0 million in the year-ago quarter, reflecting a growth of 8.3%.
Financials
Cash and cash equivalent at Wisconsin Energy as of June 30, 2011 was $10.6 million, compared with $24.5 million as of December 31, 2010. Long-term debt rose from the year-end 2010 level of $3,932.0 million to $4,334.6 million as of June 30, 2011.
Cash from operating activities at the end of the second quarter was $648.6 million versus $423.7 million in the year-ago quarter. The company spent about $347.1 million towards capital expenditure through the six months ended June 30, 2011, which reflected a decline of 8.4% from $379.1 million spent in the year-ago comparable period.
Our Take
Based in Milwaukee, Wisconsin, Wisconsin Energy along with its subsidiaries generates and distributes electricity in Southeastern, East Central, and Northern Wisconsin, as well as in the Upper Peninsula of Michigan. The company also distributes natural gas.
Wisconsin Energy’s closest peer Xcel Energy Inc. (XEL) also reported its second quarter earnings results today. Xcel Energy’s operating earnings of 33 cents per share was a cent above the Zacks Consensus Estimate of 32 cents and beat the year-ago numbers by 4 cents.
The company’s results benefitted from higher electric margins as a result of interim rates in Minnesota and North Dakota; partially offset by the impact of lower Colorado seasonal rates implemented in June 2010, increases in operating and maintenance expenses, property taxes and depreciation expense, in part from new generation plant investment.
Wisconsin Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain a long-term Neutral rating on the stock.
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