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WEC ENERGY GROUP, INC. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

WEC Energy Group, Inc.

Filing date:

02/21/2025

TLDR:

WEC Energy Group’s 10-K filing for FY 2024 shows increased net income despite decreased operating revenues. The company is focused on transitioning to cleaner energy sources while navigating regulatory and economic challenges.

ELI5:

WEC Energy Group, a utility company, made more money this year even though they brought in less revenue. They’re working on switching to cleaner energy but face some hurdles with regulations and the economy.

Accession #:

0000107815-25-000103

Published on

Analyst Summary

  • Net income attributed to common shareholders increased by $195.5 million in 2024 compared to 2023.
  • Operating revenues decreased from $8,893.0 million in 2023 to $8,599.9 million in 2024.
  • Wisconsin segment net income increased by $11.8 million.
  • Illinois segment net income increased significantly by $112.1 million, primarily due to the absence of a large impairment charge that was present in 2023.
  • Non-Utility Energy Infrastructure segment net income increased by $44.8 million.
  • Gross Profit Margin increased from 64.12% to 69.12%.
  • Operating Profit Margin increased from 21.45% to 25.03%.
  • Net Profit Margin increased from 14.98% to 17.76%.
  • Return on Assets (ROA) increased from 3.03% to 3.22%.
  • Return on Equity (ROE) increased from 11.36% to 12.32%.
  • Basic and Diluted EPS increased from $4.22 to $4.83.
  • Current Ratio increased from 0.55 to 0.60.
  • Quick Ratio increased from 0.39 to 0.43.
  • Debt-to-Equity Ratio increased from 1.59 to 1.62.
  • Asset Turnover decreased from 0.20 to 0.18.
  • Price-to-Earnings Ratio (P/E) is 21.54.
  • Price-to-Book Ratio (P/B) is 2.67.
  • Price-to-Sales Ratio (P/S) is 3.84.
  • EV/EBITDA is 13.55.
  • Revenue Growth is -3.3%.
  • Net Income Growth is 14.46%.
  • EPS Growth is 14.45%.

Opportunities and Risks

  • Regulatory Risks: Changes in regulations and the ability to recover costs through rates are significant risks. The Illinois regulatory environment presents challenges, particularly regarding the Safety Modernization Program (SMP).
  • Environmental Risks: Compliance with environmental regulations, including those related to climate change, could result in significant costs.
  • Supply Chain and Inflation: Supply chain disruptions and inflation could increase costs and delay projects.
  • Cybersecurity: The company faces ongoing cybersecurity threats that could disrupt operations.
  • Renewable Energy Growth: Investments in renewable energy projects offer growth opportunities and align with environmental goals.
  • Infrastructure Upgrades: Modernizing infrastructure enhances reliability and efficiency.
  • Strategic Partnerships: Collaboration with other utilities and organizations can drive innovation and cost savings.

Potential Implications

Stock Price

  • Monitor regulatory developments in Illinois, particularly regarding the SMP and cost recovery mechanisms.
  • Track progress on renewable energy projects and assess their impact on carbon emission reduction goals.
  • Evaluate the effectiveness of hedging strategies to mitigate commodity price volatility.
  • Assess the impact of inflation and supply chain disruptions on capital expenditure plans.

WEC Energy Group, Inc. (WEC) 10-K Filing Analysis – FY 2024

Executive Summary

This report analyzes WEC Energy Group’s 10-K filing for the fiscal year ended December 31, 2024. The analysis covers key financial performance indicators, strategic initiatives, risk factors, and overall assessment of the company’s position. WEC Energy Group is navigating a complex environment with a focus on transitioning to cleaner energy sources while maintaining reliability and affordability. Key areas of focus include regulatory impacts, capital expenditure plans, and environmental compliance.

Company Overview

WEC Energy Group, Inc. (WEC) is a diversified holding company focused on providing regulated natural gas and electricity, renewable energy, and nonregulated renewable energy. The company operates primarily in Wisconsin, Illinois, Michigan, and Minnesota. WEC also has an equity interest in American Transmission Company (ATC), an electric transmission company. The company is focused on environmental stewardship, reliability, operating efficiency, financial discipline, exceptional customer care, and safety.

Detailed Analysis

Financial Performance

  • Net Income: Net income attributed to common shareholders increased by $195.5 million in 2024 compared to 2023.
  • Revenue: Operating revenues decreased from $8,893.0 million in 2023 to $8,599.9 million in 2024.
  • Key Segment Performance:
    • Wisconsin segment net income increased by $11.8 million.
    • Illinois segment net income increased significantly by $112.1 million, primarily due to the absence of a large impairment charge that was present in 2023.
    • Non-Utility Energy Infrastructure segment net income increased by $44.8 million.

Key Ratios and Trends

Detailed financial ratios are not provided in the extracted data. However, the report highlights trends in revenue, expenses, and segment performance, which can be used to derive key ratios with additional data.

Management’s Discussion and Analysis (MD&A) Insights

  • Strategic Shift: The company is actively transitioning from coal-fired generation to renewable energy sources and natural gas.
  • Capital Investments: Significant capital expenditures are planned for renewable energy projects and infrastructure upgrades.
  • Environmental Goals: WEC Energy Group is committed to reducing carbon emissions and achieving net-zero methane emissions.

Risk and Opportunities

Risks:

  • Regulatory Risks: Changes in regulations and the ability to recover costs through rates are significant risks. The Illinois regulatory environment presents challenges, particularly regarding the Safety Modernization Program (SMP).
  • Environmental Risks: Compliance with environmental regulations, including those related to climate change, could result in significant costs.
  • Supply Chain and Inflation: Supply chain disruptions and inflation could increase costs and delay projects.
  • Cybersecurity: The company faces ongoing cybersecurity threats that could disrupt operations.

Opportunities:

  • Renewable Energy Growth: Investments in renewable energy projects offer growth opportunities and align with environmental goals.
  • Infrastructure Upgrades: Modernizing infrastructure enhances reliability and efficiency.
  • Strategic Partnerships: Collaboration with other utilities and organizations can drive innovation and cost savings.

Uncommon Metrics

The provided data does not include specific uncommon metrics. However, the report mentions customer growth and energy conservation efforts, which could be further analyzed using metrics like customer acquisition cost and energy efficiency program effectiveness.

Conclusion and Actionable Insights

WEC Energy Group is strategically positioned to benefit from the increasing demand for cleaner energy. However, the company faces regulatory and economic challenges that could impact its financial performance. The company’s commitment to environmental stewardship and infrastructure upgrades is positive, but careful management of costs and regulatory relationships is crucial.

Overall Assessment: Hold. The company’s strategic direction is promising, but regulatory uncertainties and economic risks warrant a cautious approach.

Recommendations:

  • Monitor regulatory developments in Illinois, particularly regarding the SMP and cost recovery mechanisms.
  • Track progress on renewable energy projects and assess their impact on carbon emission reduction goals.
  • Evaluate the effectiveness of hedging strategies to mitigate commodity price volatility.
  • Assess the impact of inflation and supply chain disruptions on capital expenditure plans.

Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

  • Ratio/Metric: Gross Profit = Operating Revenues – Cost of Sales = $8,599.9 – $2,656.0 = $5,943.9 million. Gross Profit Margin = $5,943.9 / $8,599.9 = 69.12%
  • Trend: Previous Gross Profit = $8,893.0 – $3,191.2 = $5,701.8 million. Previous Gross Profit Margin = $5,701.8 / $8,893.0 = 64.12%. Percentage Change = (69.12 – 64.12) / 64.12 = 7.80%
  • Industry: The average gross profit margin for the Utilities sector is approximately 35%. WEC’s gross profit margin is significantly higher, indicating strong cost management or revenue generation relative to its direct costs.

Operating Profit Margin

  • Ratio/Metric: Operating Income / Operating Revenues = $2,152.8 / $8,599.9 = 25.03%
  • Trend: Previous Operating Income / Operating Revenues = $1,908.0 / $8,893.0 = 21.45%. Percentage Change = (25.03 – 21.45) / 21.45 = 16.69%
  • Industry: The average operating profit margin for the Utilities sector is around 15%. WEC’s operating profit margin is higher, suggesting efficient operations and cost control.

Net Profit Margin

  • Ratio/Metric: Net Income Attributable to Common Shareholders / Operating Revenues = $1,527.2 / $8,599.9 = 17.76%
  • Trend: Previous Net Income Attributable to Common Shareholders / Operating Revenues = $1,331.7 / $8,893.0 = 14.98%. Percentage Change = (17.76 – 14.98) / 14.98 = 18.56%
  • Industry: The average net profit margin for the Utilities sector is approximately 10%. WEC’s net profit margin is considerably higher, reflecting strong profitability after all expenses and taxes.

Return on Assets (ROA)

  • Ratio/Metric: Net Income Attributable to Common Shareholders / Total Assets = $1,527.2 / $47,363.2 = 3.22%
  • Trend: Previous Net Income Attributable to Common Shareholders / Total Assets = $1,331.7 / $43,939.7 = 3.03%. Percentage Change = (3.22 – 3.03) / 3.03 = 6.27%
  • Industry: The average ROA for the Utilities sector is around 2%. WEC’s ROA is above average, indicating effective asset utilization to generate profits.

Return on Equity (ROE)

  • Ratio/Metric: Net Income Attributable to Common Shareholders / Common Shareholders’ Equity = $1,527.2 / $12,395.0 = 12.32%
  • Trend: Previous Net Income Attributable to Common Shareholders / Common Shareholders’ Equity = $1,331.7 / $11,724.2 = 11.36%. Percentage Change = (12.32 – 11.36) / 11.36 = 8.45%
  • Industry: The average ROE for the Utilities sector is approximately 8-10%. WEC’s ROE is higher, suggesting efficient use of equity to generate profits.

Earnings Per Share (EPS) – Basic and Diluted

  • Ratio/Metric: Basic EPS = $1,527.2 / 316.2 = $4.83. Diluted EPS = $1,527.2 / 316.5 = $4.83
  • Trend: Previous Basic EPS = $4.22. Previous Diluted EPS = $4.22. Percentage Change = (4.83 – 4.22) / 4.22 = 14.45%
  • Industry: EPS varies significantly within the Utilities sector. A benchmark requires specific competitor data. However, an increasing EPS is generally a positive sign.

Liquidity

Current Ratio

  • Ratio/Metric: Current Assets / Current Liabilities = $2,911.7 / $4,841.9 = 0.60
  • Trend: Previous Current Assets / Current Liabilities = $2,795.7 / $5,114.8 = 0.55. Percentage Change = (0.60 – 0.55) / 0.55 = 9.09%
  • Industry: A current ratio of 1.0 or greater is generally considered healthy. WEC’s current ratio is below 1, suggesting potential liquidity challenges.

Quick Ratio (Acid-Test Ratio)

  • Ratio/Metric: (Current Assets – Inventory) / Current Liabilities = ($2,911.7 – $813.2) / $4,841.9 = 0.43
  • Trend: Previous (Current Assets – Inventory) / Current Liabilities = ($2,795.7 – $775.2) / $5,114.8 = 0.39. Percentage Change = (0.43 – 0.39) / 0.39 = 10.26%
  • Industry: A quick ratio of 1.0 or greater is generally considered healthy. WEC’s quick ratio is below 1, indicating potential short-term liquidity concerns.

Cash Ratio

  • Ratio/Metric: Cash / Current Liabilities = $9.8 / $4,841.9 = 0.002
  • Trend: Previous Cash / Current Liabilities = $42.9 / $5,114.8 = 0.008. Percentage Change = (0.002 – 0.008) / 0.008 = -75%
  • Industry: The cash ratio is very low, indicating a limited ability to cover current liabilities with cash alone.

Solvency/Leverage

Debt-to-Equity Ratio

  • Ratio/Metric: Total Debt / Total Equity = $20,023.7 / $12,395.0 = 1.62
  • Trend: Previous Total Debt / Total Equity = $18,652.0 / $11,724.2 = 1.59. Percentage Change = (1.62 – 1.59) / 1.59 = 1.89%
  • Industry: The average debt-to-equity ratio for the Utilities sector is around 1.0 to 1.5. WEC’s ratio is slightly higher, indicating a more leveraged position.

Debt-to-Assets Ratio

  • Ratio/Metric: Total Debt / Total Assets = $20,023.7 / $47,363.2 = 0.42
  • Trend: Previous Total Debt / Total Assets = $18,652.0 / $43,939.7 = 0.42. Percentage Change = (0.42 – 0.42) / 0.42 = 0%
  • Industry: The average debt-to-assets ratio for the Utilities sector is approximately 0.40. WEC’s ratio is in line with the industry average.

Interest Coverage Ratio (Times Interest Earned)

  • Ratio/Metric: EBIT / Interest Expense = (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($1,524.3 + $222.0 + $815.3) / $815.3 = 3.14
  • Trend: Previous (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($1,331.7 + $204.6 + $727.4) / $727.4 = 3.10. Percentage Change = (3.14 – 3.10) / 3.10 = 1.29%
  • Industry: A ratio of 2.0 or greater is generally considered acceptable. WEC’s ratio is above 2, indicating a good ability to cover interest expenses.

Activity/Efficiency

Asset Turnover

  • Ratio/Metric: Operating Revenues / Total Assets = $8,599.9 / $47,363.2 = 0.18
  • Trend: Previous Operating Revenues / Total Assets = $8,893.0 / $43,939.7 = 0.20. Percentage Change = (0.18 – 0.20) / 0.20 = -10%
  • Industry: The average asset turnover for the Utilities sector is typically low, often below 0.5. WEC’s asset turnover is within the typical range for the industry.

Valuation

Price-to-Earnings Ratio (P/E)

  • Ratio/Metric: Stock Price / EPS = $104.05 / $4.83 = 21.54
  • Industry: The average P/E ratio for the Utilities sector is around 18-22. WEC’s P/E ratio is in line with the industry average.

Price-to-Book Ratio (P/B)

  • Ratio/Metric: Market Cap / Book Value of Equity = (317.68 * $104.05) / $12,395.0 = $33,055.1 / $12,395.0 = 2.67
  • Industry: The average P/B ratio for the Utilities sector is approximately 1.0 to 2.0. WEC’s P/B ratio is higher, suggesting that the market values the company’s assets at a premium.

Price-to-Sales Ratio (P/S)

  • Ratio/Metric: Market Cap / Operating Revenues = $33,055.1 / $8,599.9 = 3.84
  • Industry: The average P/S ratio for the Utilities sector is typically between 1.0 and 2.0. WEC’s P/S ratio is higher than the industry average.

Enterprise Value to EBITDA (EV/EBITDA)

  • Ratio/Metric: EV = Market Cap + Total Debt – Cash = $33,055.1 + $20,023.7 – $9.8 = $53,069.0 million. EBITDA = Net Income + Interest + Taxes + Depreciation & Amortization = $1,524.3 + $815.3 + $222.0 + $1,354.5 = $3,916.1 million. EV/EBITDA = $53,069.0 / $3,916.1 = 13.55
  • Industry: The average EV/EBITDA for the Utilities sector is around 10-14. WEC’s EV/EBITDA is in line with the industry average.

Growth Rates

Revenue Growth

  • Ratio/Metric: ($8,599.9 – $8,893.0) / $8,893.0 = -0.033 or -3.3%
  • Industry: Revenue growth varies significantly within the Utilities sector depending on factors such as regulatory environment, service territory growth, and infrastructure investments.

Net Income Growth

  • Ratio/Metric: ($1,524.3 – $1,331.7) / $1,331.7 = 0.1446 or 14.46%
  • Industry: Net income growth varies significantly within the Utilities sector depending on factors such as regulatory environment, service territory growth, and infrastructure investments.

EPS Growth

  • Ratio/Metric: ($4.83 – $4.22) / $4.22 = 0.1445 or 14.45%
  • Industry: EPS growth varies significantly within the Utilities sector depending on factors such as regulatory environment, service territory growth, and infrastructure investments.

Other Relevant Metrics

Utility Margin (Non-GAAP)

  • Ratio/Metric: Utility Margin = Electric Revenues + Natural Gas Revenues – Fuel and Purchased Power – Cost of Natural Gas Sold = $4,921.6 + $1,408.9 – $1,455.7 – $661.9 = $4,212.9 million
  • Trend: Previous Utility Margin = $4,115.3 million. Percentage Change = (4,212.9 – 4,115.3) / 4,115.3 = 2.37%
  • Significance: This non-GAAP metric provides insight into the profitability of the core utility operations by excluding certain operating and maintenance expenses, depreciation, and taxes. The increase suggests improved efficiency in the utility segment.

Commentary

WEC Energy Group demonstrates a mixed financial performance. Profitability metrics such as gross, operating, and net profit margins, ROA, and ROE have improved year-over-year, indicating enhanced efficiency and profitability. However, liquidity ratios remain below industry benchmarks, suggesting potential short-term financial challenges. Revenue growth is negative, but net income and EPS growth are positive, indicating improved efficiency.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️