On Dec 5, we issued an updated research report on Wisconsin Energy Corporation (WEC). The company gained from its ongoing investments and improvement in the economic condition of its service territories. However, stricter regulation on greenhouse gas emission might act as a headwind as coal remains the primary fuel for Wisconsin Energy’s mode of power generation.
Wisconsin Energy’s third quarter adjusted earnings of 57 cents per share surpassed the Zacks Consensus Estimate by 11.8%. Likewise, third-quarter total revenues of $1,033.3 million exceeded the Zacks Consensus Estimate of $1,027 million by 0.6%.
The economic condition in Wisconsin Energy’s service territories is improving at a steady pace, which has resulted in higher demand from residential as well as industrial and commercial customers. The company’s large customers excluding iron ore mines used 1.3% more electricity in the first nine months of 2014 than during the comparable year-ago period. This is commendable as the majority of utility operators have been impacted by lower demand for power due to a cooler summer.
Wisconsin Energy entered into a definite agreement to acquire Integrys Energy Group (TEG). If approved, the combined entity, WEC Energy Group, Inc., will become one of the largest utilities of the Midwest with nearly 99% of its earnings coming from regulated operations. The deal is subject to the approval of shareholders of the companies and permission from various regulatory agencies.
Despite Wisconsin Energy’s efforts to diversify its generation portfolio, the company still generates a major chunk of its electricity from coal. The possibility of stricter regulations to lower greenhouse gas emission might act as a headwind, as the U.S. Environmental Protection Agency (EPA) has proposed to reduce carbon emission by 30% by 2030 from the 2005 level.
Wisconsin Energy currently has a Zacks Rank #2 (Buy). Other well-ranked stocks in the space include Black Hills Corporation (BKH) and PG&E Corporation (PCG), both sporting a Zacks Rank #1(Strong Buy).
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