Analyst Note| Andrew Bischof, CFA, CPA |
We are increasing our WEC Energy fair value estimate to $92 per share, up from $91, after it reported second-quarter earnings of $0.87 per share, up from $0.76 in the same year-ago period.
Management increased its 2021 operating earnings guidance to $4.02 to $4.05 per share from $3.99 to $4.03 and expects to deliver at the top end of the range. We continue to expect management to achieve the top half of its 5% to 7% earnings growth target. We raised our full-year earnings expectations. Time-value appreciation since our last update led to our fair value increase.
Revenue for the quarter totaled $1.7 billion, up $128 million from the same year-ago quarter. Revenue was aided by warmer-than-normal weather, continued economic recovery, and operating efficiencies. Retail deliveries of electricity were up 7.1% year over year compared with the pandemic peak when stay-at-home orders were prevalent. Strong industrial and commercial growth was partially offset by a decline in residential usage.
The company's regulatory activity should be relatively quiet this year after the company proposed a one-year stay-out at its Wisconsin utilities. This preserves the company's current allowed return on equity across its three utilities ranging from 10%-10.35%, among the highest of its peer group. If the state commission approves the company's proposal, WEC's Wisconsin utilities would next file a rate review in early 2022. We continue to expect Wisconsin will be a best-in-class regulatory environment.
The company's infrastructure investments have higher returns than WEC's regulated business with regulated utility-type risks. In late July, WEC announced it will pay Invenergy $412 million for a 90% interest in a 250 MW, 64-turbine wind farm to be completed at the end of next year. WEC has set aside $1.5 billion in its five-year capital investment budget for renewable energy, nearly doubling its $2.2 billion portfolio.