WEC Energy (WEC) Up 0.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for WEC Energy Group (WEC). Shares have added about 0.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is WEC Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

WEC Energy Q3 Earnings Top Estimates, Revenues Miss

WEC Energy delivered third-quarter 2019 adjusted earnings of 74 cents per share, which beat the Zacks Consensus Estimate of 73 cents by 1.4%. The bottom line was flat on a year-over-year basis.

Revenues

Total revenues of $1,608 million missed the Zacks Consensus Estimate of $1,665 million by 3.4%. Also, the figure declined from $1,643.7 million reported in the year-ago quarter.

Highlights of the Release

Residential use of electricity in the third quarter fell 3.8% year over year. Electricity consumption by small commercial and industrial customers declined 3.4% year on year. Electricity utilized by large commercial and industrial customers fell 4.3% on a year-over-year basis. Excluding iron ore mines, electricity utilized by large commercial and industrial customers declined 5.6%. Demand for electricity was affected by milder-than-normal weather in service territories. Moreover, destructive July storms that included nine tornadoes made extensive damage to the company’s distribution network.

WEC Energy witnessed an increase in customer base in the reported quarter. At the end of September 2019, the company had an additional 10,000 electric and 21,000 natural gas customers compared with the year-ago quarter’s level.

Total operating expenses dipped 3.3% year over year to $1,297.1 million.

Operating income in the reported quarter rose 2.7% from the prior-year quarter’s tally to $310.9 million.

Total interest expenses in the reported quarter rose 12.3% from the prior-year quarter’s figure to $125.8 million.

Financial Position

As of Sep 30, 2019, WEC Energy had cash and cash equivalents of $20 million compared with $84.5 million as of Dec 31, 2018.
 
As of Sep 30, 2019, the company had long-term debt of $10,897.3 million, up from $9,994 million at the end of 2018.

Net cash generated by the company’s operating activities in the first nine months of 2019 was $1,840.7 million compared with $2,008.2 million in the year-ago period.

Capital expenditure in the first nine months of 2019 was $1,511.5 million, up from $1,490.5 million in the year-ago period.

Guidance

Previously, the company projected its 2019 earnings per share (EPS) guidance in the range of $3.50-$3.53. Currently, 2019 EPS is expected in the range of $3.51-$3.53. The midpoint of the current guidance is $3.52, which is lower than the Zacks Consensus Estimate of $3.53.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, WEC Energy has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, WEC Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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