WEC Energy (WEC) to Gain From Investments & Clean Energy Focus
WEC Energy Group WEC is continuing to expand operations through strategic acquisitions. The company’s ongoing investments in infrastructure projects and focus on clean energy are expected to further drive its earnings performance.
However, this Zacks Rank #3 (Hold) company faces risks related to strong competition in the energy space.
Tailwinds
During 2022, WEC completed a few acquisitions. In February 2023, it received approval for the purchase of 100 megawatts (MW) of Riverside capacity for approximately $102 million.
Based on improving conditions in the company’s service area, it continues to witness an uptick in customer volumes. It expects weather-normalized electric and gas sales for the Wisconsin segment to be 0.7-1% every year during the 2025-2027 period.
The company is investing in cost-effective zero-carbon generation like solar and wind. It has plans to invest $7.3 billion in renewable assets during the 2023-2027 period and expand the clean power-generation portfolio. WEC also plans to invest $5.4 billion in regulated renewables to build 3,300 MW of solar, wind and battery storage in the 2023-2027 period.
The company is taking steps to ensure the reliability of its services, along with maintaining the affordability factor. It expects to replace 2,000 miles of piping in Chicago. It projects an annual investment of $280-$300 million, on average, and expects to make continued investments over the next decade.
Headwinds
WEC Energy’s ability to obtain and retain customers, including wholesale customers, due to increased competition in its electric and natural gas markets from retail choice, alternative electric suppliers and continued industry consolidation is a concern.
The company’s operations are subject to significant state, local and federal governmental regulation, including regulation by the various utility commissions in the states where they serve customers.
Stocks to Consider
Some better-ranked stocks from the same industry are Avista Corp. AVA, Alliant Energy Corporation LNT and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Avista has a long-term (three to five year) earnings growth rate of 6.35%. The Zacks Consensus Estimate for AVA’s 2023 earnings per share (EPS) indicates an increase of 9.4% year over year.
Alliant Energy’s long-term earnings growth rate is 6.47%. The Zacks Consensus Estimate for LNT’s 2023 EPS implies an improvement of 2.9% year over year.
NiSource has a long-term earnings growth rate of 7%. The Zacks Consensus Estimate for NI’s 2023 EPS suggests an improvement of 8.8% year over year.
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