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Energy utility, Wisconsin Energy Corporation (WEC - Analyst Report) earned net operating earnings of 72 cents per share in the first quarter of 2011, significantly beating the Zacks Consensus Estimate of 66 cents and the year-ago quarter's operating earnings of 55 cents.

Wisconsin Energy posted better-than-expected first quarter results helped by additional income from its Power the Future plan and colder winter temperatures that drove strong customer demand for natural gas.

Total Revenue

Wisconsin Energy's total revenue of $1.33 billion in first-quarter 2011 showed a growth 6.4% from $1.07 billion in the year-ago comparable period. Quarterly revenue, however, fell short of the Zacks Consensus Estimate of $1.37 billion.

Operating Highlights

In the first quarter, total retail sales of electricity at Wisconsin Energy grew 1.4% from the first quarter of 2010.

Colder winter temperatures during the quarter led to a 1.4% rise in the electricity consumption by residential customers. Electricity consumption by large commercial and industrial customers grew only 0.4% compared to last year, driven by improving economic activity in three sectors of the economy – iron ore mining, specialty steel and paper production. Consumption rates of small commercial and industrial customers showed a 2.4% growth.

At the end of March, Wisconsin Energy was serving 1,900 more electric customers and 3,200 more natural gas customers than a year ago.

Total operating expenses of Wisconsin Energy declined by 3.4% during the first quarter to $1,033.1 million mainly due to a 3.5% decline in fuel and purchased costs, 3.8% downside in cost of gas sold and a 6.5% dip in operation and maintenance expenses.

This decline in operating expenses together with robust revenues benefitted the operating results of the company. Operating income during the first quarter was $295.6 million versus $228.4 million in the year-earlier quarter, reflecting a growth of 29.4%.

Net interest expenses of the company in the quarter were $63.4 million versus $49.4 million in the year ago quarter, reflecting a growth of 28.3%.

Financials

Cash and cash equivalent at Wisconsin Energy as of March 31, 2011 were $236.0 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 $4,339.1 million as of March 31, 2011.

Cash from operating activities at the end of the first quarter was $391.0 million versus $303.7 million in the year-ago quarter. Capital expenditure in the quarter was $135.5 million, which reflected a decline of 30.4% from $194.6 million in first quarter 2010.

Outlook

For 2011, Wisconsin Energy expects earnings to be in the range of $2.05 to $2.10 per share, driven by a continuing modest recovery in the economy and keeping strong expense controls in place.

Our Take

Based in Milwaukee, Wisconsin, Wisconsin Energy, through 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 - Analyst Report) reported first quarter earnings results last week. Xcel Energy’s operating earnings of 29 cents per share were in line with both the year-ago numbers and the Zacks Consensus Estimate, benefiting from a minor sales growth, cooler than normal temperatures, and interim rates in Minnesota and North Dakota.

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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