What Do Brokers Think About WEC Energy after 1Q16?
WEC Energy’s 1Q16 Profits Soar on Integrys Acquisition
Price targets
According to Wall Street analyst estimates, WEC Energy Group (WEC) will have a flattish movement in the next one year. It has a target price of $58.60, which implies a downside of nearly 1%. It’s currently trading at $58.90.
Of the 17 analysts tracking WEC, five recommend it as a “buy,” while 11 recommend it as a “hold.” One analyst has a “sell” recommendation as of May 3, 2016.
By comparison, DTE Energy (DTE) has an estimated upside of nearly 4% with a price target of $93. It’s currently trading at $89.70. Eversource Energy (ES) has a target price of $58, which implies an upside of 1.7%. It’s trading at $57. Xcel Energy (XEL) has a nearly 1% downside in the next one year. It has a target price of $40 and is trading at $40.50 as of May 3, 2016.
The outlook for WEC
WEC Energy Group’s (WEC) acquisition of Integrys is likely to continue the incremental impact on its earnings. Near-zero growth in the electric business is forcing utilities (VPU) to tap alternative growth opportunities such as natural gas, midstream, and renewables. As a result, WEC bodes well since Integrys has a rate base focused on gas distribution.
The Integrys acquisition also raised WEC’s stake to 60% in American Transmission. Transmission rate bases tend to have a better return on equity (or ROE). WEC’s subsidiaries in Illinois and Minnesota earn lower ROEs. An improvement in ROE can ultimately be reflected in improved earnings. The capital spending plan of ~$15 billion is expected to improve WEC’s rate base, which can be recovered through rate recovery mechanisms.
WEC increased its dividend in January 2016 by 8.2% from the year-ago period and yields around 3.4%. Strong earnings growth in the coming quarters and favorable developments on the interest rate front could improve WEC’s total return potential in the near future.
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