On Jan 8, Zacks Investment Research downgraded Wisconsin Energy Corporation (WEC) to a Zacks Rank #2 (Buy).
Why the Downgrade?
Wisconsin Energy Corporation has been witnessing rising earnings estimates on the back of consistently strong performance. Moreover, this utility service provider reported positive earnings surprises in the last 4 quarters with an average beat of 7.43%. The long-term expected earnings growth rate for this stock is 5.5%
Wisconsin Energy has a systematic capital expenditure policy to upgrade and strengthen its existing infrastructure. Recently, the company released a plan to invest between $3.2 billion and $3.5 billion over the period 2014 through 2018 of which $0.71 billion will be invested in 2014.
The financial strength also allowed the company to approve of a share repurchase plan of $0.3 billion from the open market from 2014 through 2017. In addition, the company intends to lower its outstanding debt by $0.5 billion over the above mentioned period.
The positive attributes mentioned above did not evoke any upward movement in Wisconsin Energy’s earnings estimates over the last 90 days. The earnings estimates for 2013 and 2014 remained unchanged over the aforesaid period, which prompted us to lower the rank by a notch.
Recently, We Energies, a Wisconsin Energy utility, and Wolverine Power Cooperative decided to discontinue their joint venture agreement to install state-of-the-art emission control equipment in a coal-fired power plant, citing changes in business conditions in Michigan. This joint venture would have definitely benefited Wisconsin Energy and the annulment is likely to impact its long-term development goal.
Other Stocks to Consider
Other players in the electric utility industry, which look attractive at current levels, include NRG Yield, Inc. (NYLD), Westar Energy, Inc. (WR) and The AES Corporation (AES). NRG Yield, Inc. and Westar Energy Inc. hold a Zacks Rank #1 (Strong Buy) while AES Corporation carries a Zacks Rank #2 (Buy).
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