Earnings Preview: Wisconsin Energy
Wisconsin Energy Corp. (WEC), a diversified holding company, engaged in generation and distribution of electricity in the Wisconsin state as well as in the upper peninsula of Michigan, is slated to release its third-quarter 2012 earnings result before the market bell on October 31, 2012.
Recap, Second Quarter-2012
Wisconsin Energy posted mixed results in its second quarter 2012 with pro forma income of 51 cents per share edging out the Zacks Consensus Estimate of 44 cents per share and year-ago earnings of 41 cents. Bottom-line growth was primarily driven by warm summer temperatures, lower operation and maintenance costs, as well as the company's effective share repurchase program.
Although the company reaped substantial benefits from its ambitious “Power the Future” project, its top-line slid 4.7% to $944.7 million from $991.7 million in the year-ago quarter. Moreover, revenue fell short of the Zacks Consensus Estimate by $44.3 million. Lower-than-expected sales from the large commercial and industrial segment were responsible for the revenue shortfall.
Zacks Consensus
The Zacks Consensus Estimate for the third quarter 2012 is 57 cents per share, up 3.6% from 55 cents reported in the comparable quarter, last year. At present, the Zacks Consensus Estimate for earnings ranges from 56 cents to 58 cents per share.
For full year 2012, the Zacks Consensus Estimate is $2.32 per share, 6.4% higher than its prior year-end earnings of $2.18 per share. The current Zacks Consensus Estimate is in the band $2.25-$2.38 per share.
Estimate Revisions Trend
Agreement
We see a few estimate revisions at this point. Out of a total of 8 estimates, 1 lone estimate moved north while none was revised downwards in the past 30 days for the third quarter. For the quarter, no movement was observed in the past week.
A similar trend was visible for 2012 over the last month, with 1 out of the 14 estimates jumping up. The last 7 days witnessed no revision to the estimates.
Magnitude
The Zacks Consensus Estimate for the third quarter remained static in the last 7 and 30 days. For full year 2012 the consensus estimate inched up by a penny to $3.52 from $3.51 for the past month while it was unchanged in the past week.
Surprise History
With respect to earnings surprises, Wisconsin Energy has registered favorable earnings in the all of the past four quarters. The earnings surprise in the last four quarter ranges from 1.4% to 16%. The average surprise over the last four quarter remained a positive 8.5%.
Our Recommendation
Wisconsin Energy’s growth accentuating projects like the biomass plant in Northern Wisconsin and its air quality control improvement initiative at the original Oak Creek will broaden its renewable energy portfolio. Also, the company’s recent decision to convert the 280 megawatt (MW), coal-fired Valley Power Plant generation unit to natural gas would sit well with its growth initiatives. Moreover, a healthy dividend outlook and strong repurchase program will arrest investors’ confidence.
However, compliance with regulatory standards could lead to cost escalation and continued outages as well as weather variations are risks the company needs to watch out for.
Wisconsin Energy operates in a highly competitive energy market and faces intense opposition from companies like Integrys Energy Group, Inc. (TEG) and Xcel Energy Inc. (XEL).
Currently, we are maintaining a long-term Neutral recommendation on Wisconsin Energy Inc. The company has a Zacks #2 Rank implying a short-term Buy rating on the stock.
Read the Full Research Report on WEC
Read the Full Research Report on XEL
Read the Full Research Report on TEG
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