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WEC Energy Gains from Economic Growth, Regulations a Woe

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On Nov 21, we updated a research report on WEC Energy Group, Inc. (WEC - Free Report) . The company benefited significantly from the Integrys acquisition and above-average temperatures in its service territories. However, a delay in the completion of ongoing capital projects could increase its expenses and reduce profitability.

Recently, WEC Energy reportedthird-quarter earnings of 69 cents per share, beating the Zacks Consensus Estimate of 60 cents by 15%. Quarterly earnings also surged 19% year over year. However, total revenue amounted to $1,713 million, missing the Zacks Consensus Estimate of $1,719 million by 0.3%.

Notably, improving economic conditions in its service territories has been propelling demand from residential as well as industrial and commercial customers.

This has also led to an uptick in the company’s customer base, with Wisconsin utilities recording an increase of 7,000 in electric customers and 13,000 in natural gas customers. Overall, natural gas utilities in Illinois, Michigan and Minnesota are serving approximately 18,000 more customers from a year ago.

WEC ENERGY GRP Price and EPS Surprise


Including the integration of Integrys Energy, the company now projects earnings per share in the range of $2.88–$2.94 for the full year, indicating an annual growth rate of 6% to 8%. The acquisition has been accretive to WEC Energy’s overall performance, adding $526 million to its net cash flow in the first nine months of 2016.

On the flip side, despite investing considerably in the installation of pollution control equipment and in the conversion of fuel source to natural gas from coal, apart from retiring certain units, coal continues to constitute a major share of WEC Energy’s power generation mix. Even though the company lowered emission levels by 23% over the last 15 years, coal still accounts for 50% of the total power generated.

Moreover, WEC Energy’s generation and distribution facilities are subject to risks associated with the breakdown or failure of equipment or processes due to fuel supply or transportation disruptions, accidents and labor disputes or work stoppages by employees.

Zacks Rank & Other Stocks to Consider

WEC Energy currently has a Zacks Rank #2 (Buy). Other favorably placed stocks in this sector include CenterPoint Energy, Inc. (CNP - Free Report) , FirstEnergy Corp. (FE - Free Report) and Hawaiian Electric Industries Inc. (HE - Free Report) .

CenterPoint Energyhas delivered an average positive earnings surprise of 5.1% in the trailing four quarters. The company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FirstEnergy, another Zacks Rank #2 stock, has delivered an average positive earnings surprise of 7.3% in the trailing four quarters.

Hawaiian Electric Industries has posted positive earnings surprise in all of the last four quarters, with an average beat of 2.9%. The company carries a Zacks Rank #2 as well.

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