On Jan 14, 2014, we have upgraded our recommendation on Wisconsin Energy Corporation (WEC) to Outperform from Neutral. The company currently has a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The upward revision is primarily based on Wisconsin Energy’s consistent performance, completion of a biomass plant in Rothschild and strong earnings potential on the back of its ‘Power the Future’ plan. In addition, the company’s steady share repurchase program and incremental dividend payment also led us to improve our recommendation.
In the third quarter of 2013, Wisconsin Energy’s earnings and revenues beat the Zacks Consensus Estimate driven by higher sales from the Energy Utility and Energy Non-utility segments.
Wisconsin Energy continues to improve and strengthen its asset portfolio by upgrading its aging distribution infrastructure, constructing blocks and installing pipes and poles. The company plans to invest $3.2 – $3.5 billion in its several growth projects within 2014 to 2018, $0.71 billion of which is expected to be allocated for 2014.
In addition, the company is also expanding its renewable asset base. In Nov 2013, the company completed its biomass project in Rothschild. This initiative will enable Wisconsin Energy to diversify its power generation portfolio, thereby meeting the government’s renewable standard for electricity generation.
We appreciate the company’s steady effort to reduce its debt level. Wisconsin Energy intends to pay off approximately $0.5 billion in debts by 2017, which will help the company to improve its upcoming margins.
Other Stocks to Consider
Some other stocks worth considering in the utility industry include The AES Corporation (AES), ALLETE, Inc. (ALE) and Alliant Energy Corporation (LNT), each with a Zacks Rank #2 (Buy).
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