Morningstar | WEC Energy Group Posts Strong Full-Year Earnings
We are reaffirming our $64 fair value estimate and narrow economic moat rating after WEC Energy Group reported full-year operating earnings per share of $3.34 compared with $3.14 per share in the same year-ago period. Management reaffirmed its 2019 earnings guidance of $3.48 to $3.52 per share, in line with our $3.50 per share estimate.Effective Feb. 1, Kevin Fletcher took over as CEO of WEC Energy, succeeding longtime executive Gale Klappa. Fletcher joined WEC Energy from highly respected Southern Company in May 2016 and has held various leadership positions since. We view him as a strong replacement for Klappa and is an example of the company's deep management bench. Klappa will remain executive chairman for three years. Klappa's deep knowledge of the company will serve Fletcher and investors well. We also like that the chairman and CEO roles will be separate, uncommon among its peers.
We remain concerned about the long-term demand growth potential from Foxconn's planned expansion in Wisconsin. Numerous media organizations, as well as announcements from Foxconn executives, lead us to believe Foxconn might lower its development plans for Wisconsin. WEC management has previously highlighted expectations for 1.2% to 1.5% electricity growth in 2022-23, up from the flat to 0.5% expectations for 2019-21, due in part to regional development plans spearheaded by Foxconn. Reductions in WEC's capital growth plans could affect our fair value estimate, though numerous other regional growth investments also support load growth in 2022-23.
Full-year earnings were above management's and our expectations. For the year, management guided to $3.26 to $3.32 per share. Colder-than-normal weather, strong normalized electricity deliveries across its customer base, and robust gas demand and customer growth helped fourth-quarter earnings.
WEC Energy Group is a holding company. Through its subsidiaries, the company provides regulated natural gas and electricity, and nonregulated renewable energy. The company's segments include: Wisconsin, which generates and distributes electric energy and provides retail natural gas distribution service; Illinois, which includes the natural gas utility operations; Electric Transmission, which owns, maintains, monitors, and operates electric transmission systems in Wisconsin, Michigan, Illinois, and Minnesota; and Non-Utility Energy Infrastructure, which owns and leases generating facilities to its Wisconsin Electric Power Company subsidiary and owns underground natural gas storage facilities in Michigan.
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