Strong Buy on Wisconsin Energy

On Jan 12, Zacks Investment Research upgraded Wisconsin Energy (WEC - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Consistent performance from this electric utility and strong third-quarter results sparked upward earnings estimate revisions. Moreover, this utility delivered positive earnings surprises in the last 4 quarters with an average beat of 9.77%. The long-term expected earnings growth rate for this stock is 5.5%.

The utility reported third-quarter earnings on Oct 31. Non-GAAP earnings per share of 67 cents per share surpassed the Zacks Consensus Estimate by 17.54% and exceeded the year-ago figure by 21.8%.

The upsurge was driven by weather-influenced higher demand, lower operation and maintenance costs and the tailwind from the share repurchase program.

The capital expenditure budget of $3.5 billion over the 2012 through 2016 period directed towards smaller business projects and the upgrade of its infrastructure will enable the utility to improve future earnings. In addition, investments made under its “Power the Future” plan have also boosted the performance of the company.

In December 2012, the company raised its quarterly dividend rate to 34 cents. The annual dividend of $1.36 per share results in a dividend yield of 3.58%, higher than the industry average of 2.25%, making the shares attractive.

The Zacks Consensus Estimate for 2012 moved higher by 0.4% to $2.32 per share over the last 90 days, which reflects year-over-year growth of 6.4%. The Zacks Consensus Estimate for 2013 increased 0.4% to $2.40 per share over the same period, an estimated year-over-year rise of 3.4%.

Other Stocks to Consider

Other than Wisconsin Energy, there are a few more electric utilities performing well and holding a favorable Zacks Rank. The stocks also worth considering are Ameren Corporation (AEE - Analyst Report) and Integrys Energy Group Inc. (TEG - Analyst Report). Both currently have a short-term Zacks Rank #1 (Strong Buy).