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WEC Energy is Gaining From More Customers: Time to Buy?

WEC Energy Group WEC is gaining from ongoing improvements in economic conditions in service territories. The company is currently serving more customers than the year-ago level. Further, the planned long-term investments in infrastructure projects are anticipated to aid in meeting the increasing customer demand, as it continues to improve service reliability.

However, the company’s exposure to regulatory compliance and further delays in the completion of ongoing capital projects could increase expenses and affect profitability margin.

The improvement in economic condition in WEC Energy’s service territories have resulted in higher demand from residential, industrial and commercial customers. Its ongoing investments in infrastructure projects and gains from increased demand are aiding the company with a stable earnings growth. Surely, the stable earnings growth has helped the company in delivering an average positive earnings surprise of 3.08% in the trailing four quarters.

The company anticipates capital expenditure to be in the range of $9.5-$10.0 billion between 2017 and 2021. Out of this, $5,464 million is allotted for Gas Delivery, $2,601 million for Electric Delivery and $1,659 million for Generation.

Such robust investment planning in turn has encouraged the company to predict a long-term earnings growth in the range of 5-7% per year, as nearly 99% of its earnings is generated from regulated operations.

Further, the utility's consistent hike in dividends has made it a safe bet among shareholders. Notably, WEC Energy paid $492.4 million in dividends during the first nine months of 2017, an increase of $23.8 million from the same period last year. Furthermore, WEC Energy projects annual dividends to grow in tandem with earnings and a payout ratio of 65-70%. Dividend hikes have been a common practice among utilities, owing to steady demand that it enjoys. Notably, we have witnessed other players like PNM Resources, Inc. PNM, CenterPoint Energy, Inc. CNP and The AES Corporation AES hike dividends for shareholders, on an annual basis.

However, the company's capital growth projects those are still underway and in the pipeline phase, are subject to delays in the completion. Amid rising interest environments any such delays are likely to increase the expenses of the company and reduce profitability.

Price Movement

WEC Energy has outperformed the industry in the last six months. The company’s shares have gained 9.4%, outperforming the industry’s growth of 3.6%. The outperformance can be attributed to the company’s strong performance owning to increased demand by customer additions.

 

Zacks Rank

WEC Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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WEC Energy Group, Inc. (WEC): Free Stock Analysis Report
 
CenterPoint Energy, Inc. (CNP): Free Stock Analysis Report
 
The AES Corporation (AES): Free Stock Analysis Report
 
PNM Resources, Inc. (Holding Co.) (PNM): Free Stock Analysis Report
 
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