Wisconsin Energy's Mixed Bag - Analyst Blog

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Wisconsin Energy Inc. ( WEC ) announced its first quarter 2012 earnings of 74 cents in contrast to 72 cents per share in the year-ago quarter, indicating a surge of 2.7%. Earnings in the current quarter surpassed Zacks Consensus estimate of 73 cents per share.

This earnings outperformance can be attributed to robust recovery of fuel costs from power generation, decline in company's operation and maintenance costs and strong share repurchase activities. These positives were partially offset by lower demand due to warmer temperature in the winter season.

Total Revenue

Revenue in the first quarter of 2012 was $1.19 billion down 10.5% from $1.33 billion in the year-ago quarter. Revenue fell short of Zacks Consensus Estimate of $1.29 billion.

The lower revenue was factored by weak customer demand owing to mild winter weather. The reasons for the fall in demand can be traced back to a 2.1% fall in electricity consumption by small commercial and industrial customers and 4.3% less residential electricity users from the year-ago quarter.

Moreover, demand for natural gas among residential consumers dropped markedly by 24% from the comparable year-ago quarter. 

Operation Highlights

Total operating expenses in the first quarter of 2012 was $895.5 million down 13.3% versus $1,033.1 million in the year-ago quarter. The decline ensued from the cost of gas sold that fell 30.6% along with operation and maintenance costs, which dropped 8.6%.

Total operating income was flat with the year-ago quarter. This was due the adverse effect of the revenue decline that was compensated by lower operating costs. 

Interest expense also witnessed a 7% decrease to $58.9 million from $63.4 million in the year-ago quarter, owing to lower long-term debt.

Financial Screening

Cash and cash equivalents as of March 31, 2012 was $18.1 million versus $14.1 million as of December 31, 2011.

Long-term debt as of March 31, 2012 was $4,602.8 million versus $4,614.3 million as of December 31, 2011.

Capital expenditure during the first quarter 2012 was $142.3 million compared to $135.5 million in the first quarter of 2011.

Guidance

The company earnings per share projection is in the range of $2.24 to $2.29 per share.

Peer Update

Xcel Energy Inc. ( XEL ), a competitor of Wisconsin Energy, announced operating earnings for the first quarter of 2012 of 41 cents per share, down 4 cents from the year-ago quarter. It modestly surpassed the Zacks Consensus Estimate by 4 cents.

Revenue fell 8.4% to $2,578.0 million in the reported quarter from $2,817.0 million in the year-ago period. The quarter's revenue also fell short of the Zacks Consensus Estimate of $2,832.0 million.

Our View

Wisconsin Energy's earnings performance beat Zacks Consensus Estimate although poor revenues stuck out. The surge in its residential and industrial customer bases is a positive sign for the company.

However, constraining factors like temperature fluctuations could lower demand for electricity and natural gas.

Wisconsin Energy holds a Zacks #4 Rank, which translates to a short-term Sell rating.  We have a Neutral recommendation for the long term.

Based in Milwaukee, Wisconsin, the company is involved in the generation, distribution and sale of electric energy and steam. It is also engaged in the purchase, distribution, transportation and sale of natural gas.


 
WISC ENERGY CP ( WEC ): Free Stock Analysis Report
 
XCEL ENERGY INC ( XEL ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: WEC , XEL

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