WEC Energy Is 'Leader Of The Pack' With Strong Prospect In Wisconsin, Analyst Says

RBC Capital Markets analyst Shelby Tucker initiated coverage of WEC Energy Group Inc WEC with a Sector Perform rating with a price target of $95.

The analyst thinks the growth opportunities in Wisconsin remain attractive, led by the push for electrification and decarbonization.

Tucker expects Microsoft Corp's MSFT investment in data centers in Wisconsin to offer incremental investment opportunities for WEC over the medium term.

Notably, the analyst expects MSFT's investment to boost WEC's capital expenditure, with other additional growth investments in the next capital plan to drive the 2024-2028 plan higher than the current $20.1 billion plan through 2027.

The analyst estimates the company's total asset base growth of 8%, including ATC and WECI investments, driven by accelerated electrification, decarbonization, and reliability to regulated electric investment opportunities. 

Also, Tucker sees pipe replacement and gas conversions to drive growth and expects WEC's transmission exposure to offer opportunities to address capacity constraints and reliability needs. 

However, the analyst notes that WEC has raised its usage of parent debt to ~30%, and any increase in leverage can weigh on the FFO/debt ratio.

Tucker estimates adjusted EPS of $4.60 in 2023, $4.90 in 2024, $5.25 in 2025, $5.59 in 2026 and $5.95 in 2027. 

The analyst expects the dividend payout ratio to remain between 65-70% through 2027.

Also Read: WEC Energy: A Brighter Outlook Despite Regulatory Hurdles, Says Analyst

Price Action: WEC shares are trading lower by 0.81% at $80.98 on the last check Wednesday.