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Wisconsin Energy Corporation (WEC - Analyst Report) posted net operating earnings of 43 cents per share in the fourth quarter of 2012, beating the Zacks Consensus Estimate of 41 cents per share. However, quarterly earnings fell short of the year-ago quarter’s operating earnings of 49 cents per share largely due to lower top line.

Wisconsin Energy’s full-year 2012 operating earnings were $2.35 per share, surpassing the Zacks Consensus Estimate of $2.32 per share. Annual earnings were higher than the year-ago level of $2.18 per share primarily due to lower operating expenses and favorable summer season.

Total Revenue

Wisconsin Energy’s total revenue in fourth-quarter 2012 was $1.07 billion, reflecting a dip of 3.6% from $1.11 billion in the year-ago period primarily due to drop in electricity consumption by large commercial and industrial customers. However, quarterly revenues surpassed the Zacks Consensus Estimate of $1.06 billion.

Wisconsin Energy’s total revenue for 2012 decreased 5.3% year over year to $4.2 billion. Annual revenue of the company was also lower than the Zacks Consensus Estimate of $4.4 billion.

Operational Update

Total operating expenses during the quarter decreased 9%, and full-year 2012 costs reduced 25.1% year over year. This was due to a decline in the cost of goods sold, lower fuel and purchased power costs as well as reduction in other operation and maintenance costs.

In full-year 2012, operating expenses, as a percentage of total revenue, decreased 378 basis points year over year, boosting the operating results.

Despite a decline in full-year 2012 revenue, reduction in costs drove 2012 operating income 12.7% to $1 billion from $0.89 billion in 2011.

Net interest expenses in 2012 were $248.2 million versus $235.8 million in 2011, up 5.3%.

Financials

Wisconsin Energy’s cash and cash equivalents as of Dec 31, 2012 were $35.6 million versus $14.1 million as of Dec 31, 2011.

Long-term debt decreased to $4.5 billion as of Dec 31, 2012 from the prior-year level of $4.6 billion.

Cash from operating activities for 2012 was $1.2 billion versus $1 billion in 2011.

Capital expenditure during the year was $707 million, down from $830.8 million incurred in 2011.

Dividend Update

Wisconsin Energy has been consistently paying dividends to its shareholders. In Dec 2012, the company announced a quarterly dividend of 34 cents, which reflects an increase of 4 cents from the prior quarterly rate. This increased dividend will be paid on Mar 1, 2013, to shareholders of record as of Feb 14, 2013.

The new annualized dividend rate will be $1.36 per share, reflecting growth of 13.3% from the previous annualized rate of $1.20 per share.

Our Take

Wisconsin Energy not only surpassed the earnings projections, but rise in consumption of electricity by the residential, and small commercial and industrial customers are also positive signs for the company. In addition, the company served additional 3,200 electricity and 5,800 natural gas customers in 2012 as against the previous year.

Moreover, we expect Wisconsin Energy’s ‘Power the Future’ plan, and its internal growth projects including the biomass plant in Rothschild and the air quality control improvement activities at the original Oak Creek units to act as positive catalysts for its future performance.

Wisconsin Energy Corporation currently has a short-term Zacks Rank #1 (Strong Buy).

Milwaukee, Wisconsin-based Wisconsin Energy Corporation 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. Other players in  the sector, such as Ameren Corporation (AEE - Analyst Report), Pike Electric Corporation (PIKE - Snapshot Report) and Integrys Energy Group, Inc. (TEG - Analyst Report), all carrying Zacks Rank #1 (Strong Buy), are yet to announce their earnings results.

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