WEC Energy Earnings: Strong Second Quarter Puts Company on Track To Meet Full-Year Results

Following WEC WEC Energy’s second-quarter earnings per share of $0.92, up from $0.91 reported in the year-ago period, we are maintaining our $96 fair value estimate. Our narrow moat rating is unchanged.

The company reaffirmed its 2023 EPS guidance of $4.58-$4.62, in line with our estimate. Management also reaffirmed its long-term annual earnings growth target of 6.5%-7%, consistent with our 7% forecast. We expect dividend growth in line with earnings growth. This year’s dividend is up 7.2% from 2022.

In Wisconsin, the company’s utilities’ limited reopener of the previous rate agreement continues to progress. The limited review looks to address recovery of new renewable generation, liquefied natural gas reliability investments, and projected operating savings from coal plant retirements. Importantly, the company’s return on equity and equity layer are not under consideration. Consistent with our overall view of Wisconsin regulation, we expect a constructive outcome supportive of the utilities’ investment plan.

In an additional sign of regulatory support, the Wisconsin state commission has approved nearly $1 billion of renewable energy investment since the finalization of the company’s recent rate case.

A rate case for the company’s smaller Illinois subsidiaries is ongoing. Regulatory staff has recommended a 9.83% return on equity, slightly below WEC’s 9.9% request and well above its current 9.05% allowed ROE. Regulatory approval of a 9.83% allowed ROE would have small positive impact on our fair value estimate.

Earnings in the quarter benefited from continued investment and lower-than-expected operating expenses. Partially offsetting these benefits was unfavorable weather compared with the year-ago period.