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Here's Why You Should Add WEC Energy (WEC) to Your Portfolio

Zacks Equity Research

WEC Energy WEC is gaining from consistent investments in infrastructure projects and steady financial performance.

This Zacks Rank #2 (Buy) utility is a promising pick for investors at the moment, courtesy of consistent customer growth and initiatives to boost shareholders’ value.

Growth Projections & Surprise History

The Zacks Consensus Estimate for 2019 earnings is pegged at $3.53 on $7.74 billion revenues. The bottom line indicates a rise of 5.69% year over year. Also,  the top line calls for 0.85% growth on a year-over-year basis.

The consensus mark for 2020 earnings is pegged at $3.77 on revenues of $8.04 billion. This bottom line suggests an increase of 6.8% year over year. Moreover, the top line indicates rise of 3.86% on a year-over-year basis.

Its long-term (three to five years) earnings per share growth rate is projected at 6.16%. WEC Energy pulled off an average positive earnings surprise of 4.48% in the last four quarters.

Improving Economy & Customer Addition

Amid improving economic condition, the company continues to witness rise in customer growth. At the end of the second quarter, the company had an additional 11,000 electric and 23,000 natural gas customers, up from the year-ago quarter’s levels.

This was followed by higher demand from residential as well as industrial and commercial customers. The company predicts electric and natural gas sales to rise 1.2% to 1.5%, respectively, during the 2022-2023 time frames.

Infrastructure Investments & Emission Reduction

WEC Energy is focusing on Natural Gas System Modernization Program, Technology Enhancements, Electric Redesign and Electric Resilience projects. The company’s Modernization and Reliability project incorporates modernization of the electric distribution system and burying or upgrading lines. The project is designed in two phases and is estimated to be completed by 2021. The company expects to invest $430 million in the project.

The company is also working to upgrade and reinforce its natural gas distribution system by substituting 2,000 miles of pipes. WEC Energy is concentrating on its Advanced Metering Infrastructure (AMI) program across four service states. Total capital investment will amount to nearly $1.4 billion from 2019 through 2023.  

WEC Energy is striving to lower carbon emissions by approximately 40% below 2005 levels by 2030 and 80% by 2050.

Consistent Dividend & Credit Worthiness

WEC Energy has been consistently paying out and raising dividend over seven decades. In January 2019, the company hiked annual dividend rate to $2.36, which reflects an increase of 6.8%. It expects annual dividends to grow in line with its earnings and targets payout ratio of 65-70%. The company’s current dividend yield is at 2.49% compared with the Zacks S&P 500 composite’s average of 1.95%.

WEC Energy carries steady investment-grade credit ratings, ranging between A and A-, which permits it to enjoy superior credit worthiness in the market. In return, this provides the company access to affordable fund sources for its investment projects.

Price Performance

Shares of WEC Energy have soared 41% in the past 12 months compared with the industry’s growth of 15.2% and the Zacks S&P 500 composite’s rise of 5.4%.

Price Performance (One Year)



 

Other Key Picks

Some other top-ranked stocks from the same space are DTE Energy Company DTE, NRG Energy NRG and Pampa Energia PAM. NRG Energy and Pampa Energia sport a Zacks Rank #1 (Strong Buy), while DTE Energy has a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

DTE Energy’s long-term earnings growth is projected at 6%. The Zacks Consensus Estimate for 2019 earnings has inched up 0.16% in the past 60 days to $6.22.

NRG Energy’s long-term earnings growth is projected at 36.26%. The Zacks Consensus Estimate for 2019 earnings has moved up 1.83% in the past 30 days to $3.89.

Pampa Energia’s long-term earnings growth is projected at 20.59%. The Zacks Consensus Estimate for 2019 earnings has moved up 67.8% in the past 90 days to $4.43.

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