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Will Wisconsin Energy (WEC) Beat Q2 Earnings Estimates?

Zacks Equity Research

Wisconsin Energy Corporation (WEC) will release its second-quarter 2014 financial results before the opening bell on Jul 30, 2014. In the prior quarter, the utility provider reported a positive earnings surprise of 9.64%. Wisconsin Energy currently has a Zacks Rank #1 (Strong Buy). Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Wisconsin Energy continues to upgrade and strengthen its aging distribution infrastructure. Within a time span of 2014 to 2018, the company plans to spend $3.2–$3.5 billion as capital expenditure, including the allocation of $0.71 billion on electricity and gas distribution ventures this year.

Wisconsin Energy is progressing well on its distribution expansion as well as renewable projects. Currently, the company is in the middle of several important ventures – the Oak Creek expansion unit project and a new powerhouse at the Twin Falls hydroelectric site. In addition, Wisconsin Energy has constructed a 50-megawatt biomass facility at Domtar Corporation's Rothschild, WI paper mill site.

Wisconsin Energy has continuously been adding new customers over the last several quarters, primarily due to a gradual improvement in the Wisconsin economy. A decline in the unemployment rate, switching to natural gas from propane and improvement in paper manufacturing and food processing industries are expected to boost performance.

However, the U.S. Environmental Protection Agency (:EPA) has earlier in the year proposed the Clean Power Plan that aims to reduce carbon emissions from electricity generating facilities. The EPA plans to curtail carbon emissions from power plants by 30% by 2030 from 2005 levels. Records show that Wisconsin Energy generates a significant portion of electricity from coal.

If the proposal is approved without any downward revision in emission rates, the company will have to invest more in executing pollution control measures, thereby increasing its operating costs. We however note that the proposed plan is still under review and will not be approved before next year.

Earnings Whispers

Our proven model does not conclusively show that Wisconsin Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Zacks ESP: This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 52 cents, resulting in an ESP of 0.00%.

Zacks Rank #1 (Strong Buy): Wisconsin Energy’s Zacks Rank #1 when combined with a 0.00% ESP makes surprise prediction difficult.  We caution against stocks with a Zacks Rank #4 and #5 going into the earnings release.

Other Stocks to Consider

Here are some utility companies worth considering as our model shows they have the right combination of elements to post an earnings beat this quarter.

Ameren Corporation (AEE) has an earnings ESP of +14.04% and carries a Zacks Rank #1 (Strong Buy).

Consolidated Edison, Inc. (ED) has an earnings ESP of +9.26% and carries a Zacks Rank #2 (Buy).

TECO Energy, Inc. (TE) has an earnings ESP of +3.70% and carries a Zacks Rank #2 (Buy).

Read the Full Research Report on WEC
Read the Full Research Report on AEE
Read the Full Research Report on TE
Read the Full Research Report on ED

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