Wisconsin Energy Ups EPS, Fails Rev - Analyst Blog

Energy utility, Wisconsin Energy Corporation (WEC), posted net operating earnings of $1.06 per share in the fourth quarter of 2010, ahead of the Zacks Consensus Estimate of $1.01 per share and the year-ago quarter's operating earnings of 96 cents per share.

Wisconsin Energy's fiscal year 2010 operating earnings were $3.84 per share compared with $3.19 per share reported in 2009. The results exceeded the Zacks Consensus Estimate, provided by 16 covering analysts, by a nickel.

The earnings growth was driven by effective cost controls, warm summer weather and contribution from the first expansion unit at Oak Creek, placed into commercial operation in February 2010.

Earnings, on a GAAP basis, for 2010 were $3.86 per share versus $3.24 per share recorded in 2009. The 2 cent difference between the operating and GAAP earnings, for 2010, emanated from discontinued operations.

Total Revenue

Wisconsin Energy's total revenue in fourth-quarter 2010 was $1,089.8 million, compared with $1,061.3 million in the year-ago period, reflecting a growth of 3.5%.

Reported quarter revenue however missed the Zacks Consensus Estimate of $1,215 million.

Wisconsin Energy's total revenue for 2010 upped 2.5% to $4,202.5 million from $4,100.9 million reported in the prior fiscal year.

Fiscal year 2010 revenue of the company was lower than the Zacks Consensus Estimate of $4,280 million.

Quarterly Highlights

Total operating expenses of Wisconsin Energy increased marginally by 0.2% during the fourth quarter, 2010, to $920.7 million from $918.8 million in the year-ago quarter. The year-over-year increase was mainly due to a 14.6% spike in operation and maintenance expenses, while input costs declined 6.4% year over year.

However, operating expenses, as a percentage of total revenue, declined by 278 basis points year over year, which benefited the operating results of the company. Operating income during the fourth quarter was $215.7 million versus $196.0 million in the year-earlier quarter, reflecting a neat growth of 10.0%.

Annual Snapshot

In 2010, the growth in year-over-year revenue was driven by the increase in electricity sales to all consumer groups catered by the company. The warm and humid weather sparked residential electricity sales by 6%, while a gradual recovery in the economy also secured a 6.1% increase in commercial and industrial customer usage.

Net interest expenses of the company in 2010 were $206.4 million versus $156.7 million in 2009, reflecting a growth of 31.7%. The incremental interest expenses can be attributed to a higher debt burden from the previous financial year.

Financials

Cash and cash equivalent at Wisconsin Energy as of December 31, 2010 were $24.5 million, improving 21% year over year.

Cash from operating activities for 2010 was $810.4 million versus $629.8 million in 2009.

Capital expenditure during the year was $798.2 million, which reflected a decline of $16.4 million from $814.6 million used in 2009.

Long-term debt rose from the prior-year level of $3,875.8 million to $3,932 million as of December 31, 2010.

Dividend and Stock Split

The company has been consistently paying dividends to shareholders. During 2010, the annualized dividend paid to its shareholders was $1.60 per share versus $1.35 per share in 2009, reflecting a growth of 18.1%.

In January 20, 2011, the company announced a two-for-one stock split and also declared a new dividend rate of 52 cents per share on a pre-split basis. After the split, the quarterly dividend rate will be slashed to 26 cents a share. The additional shares and the new dividend will be payable on March 1, 2011, to shareholders of record at the close of business on February 14, 2011.

Peer Update

Xcel Energy Inc. (XEL), competing with Wisconsin Energy, announced operating earnings for the fourth quarter 2010 of 29 cents per share versus 37 cents per share in the year-ago quarter, reflecting a decline of 27.6%. The results of the company missed the Zacks Consensus Estimate of 31 cents per share.

Xcel's operating earnings of 2010 were $1.62 per share compared with $1.50 per share reported in 2009. The results again lagged the Zacks Consensus Estimate, provided by 14 covering analysts, by 2 cents.

Our Take

We believe the rise in both electric and natural gas consumers of the company in 2010 is a promising sign. The new generating units being constructed by the company would add to earnings and cash flow once these enter commercial operation. The returns from current investments would in its turn lead to balance sheet improvement and fund future planned capital expenditure programs.

Wisconsin Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain a long-term Neutral rating on the stock.

Based in Milwaukee, Wisconsin, Wisconsin Energy, through its subsidiaries, generates and distributes electricity in Southeastern, East Central, and Northern Wisconsin, as well as in the Upper Peninsula of Michigan. The company also distributes natural gas.

 
WISC ENERGY CP (WEC): Free Stock Analysis Report
 
XCEL ENERGY INC (XEL): Free Stock Analysis Report
 
Zacks Investment Research