WEC Energy (WEC) reported second-quarter EPS of $0.92, vs. $0.91 last year, which was $0.07 above expectations. Unfavorable weather hurt EPS by $0.05, and higher interest and depreciation expenses took away $0.09. However, these were offset by an $0.11 increase in the company’s asset base and $0.05 from the timing of fuel expenses.
WEC maintained EPS guidance for the year of $4.58 to $4.62, assuming normal weather. With easy weather comparisons and continued growth in the asset base, along with recent regulatory approval, EPS should improve to $5.00 next year. The stock is attractively valued at 18X this estimate. WEC Energy is a buy under $93. My target is $100. The 3.4% dividend yield will add to total returns.
Fidelity National Information Services Inc. (FIS) reported second-quarter EPS of $1.55, vs. $1.73 last year, on a 1% gain in revenues. EPS results were $0.07 above expectations. Margins improved at the Worldpay Merchant Solutions business, thanks to the ongoing cost cuts, but margins declined at the Banking Solutions business due to an unfavorable business mix.
Starting next quarter, Worldpay will be considered a discontinued operation following private equity’s purchase of 55% of the unit. This will allow management to concentrate on and put more resources in the banking business, which should be a real positive. My $72 target assumes the banking unit will be worth the same 10X operating income multiple that private equity paid for Worldpay. FIS is a buy under $60.
Occidental Petroleum (OXY) reported second-quarter EPS of $0.68, vs. $3.16 a year ago, reflecting sharply lower oil and natural gas prices. Results were $0.04 below expectations.
While commodity prices are largely out of the company’s control, Occidental Petroleum continues to execute well, with production up 6% in the quarter. Recent increases in commodity prices should also bring improvement for the current quarter. Management showed its confidence in the stock by repurchasing $425 million in stock in the quarter.
EPS of $4.25 to $4.50 in the 2024 fiscal year, along with a good production outlook, should get the stock to my $75 target within 12 months. OXY is a buy below $65.