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WEC Energy (WEC) Gains on Investments & Debt Management

WEC Energy Group Inc.’s WEC ongoing investments in infrastructure projects, a focus on clean energy, the development of LNG facilities and an increase in the customer base will continue to boost its financial performance.

Tailwinds

WEC Energy is investing in cost-effective zero-carbon generation like solar and wind. In the 2022-2026 period, WEC projects capital expenditure of $17.7 billion and plans to invest $5.4 billion in renewable assets to expand the clean power generation portfolio.

Further, WEC Energy plans to invest $3.4 billion in the electric delivery business in the 2022-2026 period to make it more resilient. Systematic investments in infrastructure projects will help the company cater to the rising demand from the expanding customer base.

WEC Energy is also focused on replacing older-generation facilities with zero-carbon-emitting renewable and natural gas-based generation by 2025. WEC has updated plans and aims at reducing carbon emissions by 50% from the 2005 levels.

Additionally, WEC Energy expects to trim methane emissions by 100% from the 2011 levels by 2030. The company intends to remove 1,600 megawatts of fossil-fueled generation by 2026 and cease the use of coal as an energy source by 2035.

WEC’s total debt to capital ratio for the second quarter of 2022 was 57.2%, lower than the electric power industry’s 58.9%. The company’s times interest earned ratio at the end of the second quarter improved to 4.5 from 4.2 in the last reported quarter. The strong ratio indicates that the firm will be able to meet debt obligations in the near future without difficulties.

Headwinds

WEC Energy’s dependence on operating units to generate sufficient net income to disburse dividends and repay loans is a concern as this can adversely impact the company’s financial position.

Due to strict environmental regulations, WEC might incur significant costs associated with the installation of pollution control equipment, environmental monitoring, emission fees and permits at its facilities.

Other Stocks to Consider

Some other stocks from the same industry include American Electric Power Company AEP, AVANGRID Inc. AGR and Alliant Energy Corporation LNT.

The long-term earnings growth rate of American Electric Power, AVANGRID and Alliant Energy is projected at 6.1%, 5.9% and 6.2%, respectively.

The Zacks Consensus Estimate for 2022 earnings per share of American Electric Power, AVANGRID and Alliant Energy has moved up 5.3%, 5.1% and 6.5%, respectively, year over year.

AEP, AGR and LNT’s current dividend yield of 3.2%, 3.9% and 2.9% is better than the Zacks S&P 500 composite's average of 1.8%.


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