WEC ENERGY GROUP, INC. (WEC) stock intrinsic value fair value estimate & owner earnings analysis

WEC Energy Group is a regulated electric and natural gas utility holding company. Its largest operations are in Wisconsin, with utilities in Illinois, natural gas utilities in Minnesota and Michigan, and a smaller wind and solar business outside the regulated utilities. Because regulators set the prices it charges, its earnings come from the plant it builds and the return it is allowed to earn on it. It is in the middle of a very large build: the 2025 annual report lays out a $37.5 billion capital plan, with planned spending of about $5.0 billion in 2026 and $6.9 to $7.0 billion in each of 2027 and 2028, concentrated in solar, wind, battery storage and gas-fired generation. In 2025 it spent $4.4 billion on capital projects against $1.5 billion of depreciation. How we measured earnings. We started from operating cash flow, removed the swings in working capital, and subtracted stock compensation ($48 million in 2025) and the spending needed to replace worn-out plant. For a utility we set that replacement spending equal to depreciation ($1.48 billion in 2025); a revenue-based split of growth and upkeep does not work here because revenue includes fuel and power costs that are simply passed through to customers. Spending above depreciation is growth that earns a regulated return, funded with new debt and new shares, so it is not deducted. The Illinois plant write-downs ($130 million in 2025) are non-cash and are added back. Because we value the whole business first and then subtract what it owes, we add cash interest paid back to earnings ($858 million in 2025). On that basis, cash earnings before interest were $2.68 billion in 2024 and $2.91 billion in 2025, up 8.6%; earnings per share (before adding back interest) rose from $5.99 to $6.35, up 6.0%, and ranged between $3.55 and $4.78 from 2016 to 2022. Our own tie-out of net income plus depreciation and other non-cash items to operating cash flow matched exactly in 2023, 2024 and 2025. The level we use. We took the middle of 2024 and 2025: $2.80 billion a year, or $8.51 per current share. We left out 2023 because it predates the 2024 purchases of the Delilah I solar project ($462.5 million) and the Maple Flats project ($431.2 million) and the step-up in interest paid ($653 million in 2023, $786 million in 2024, $859 million in 2025). The first half of 2026 supports that level: operating cash flow of $2.21 billion against $2.02 billion a year earlier, and net income of $1.11 billion against $0.97 billion. Last year's actual growth was 8.6%; our base case assumes none, so it starts about 4% below the 2025 actual and does not rely on any growth continuing. What the company owes. At June 30, 2026 it had $22.6 billion of borrowings ($19.2 billion long-term, $1.4 billion due within a year and $1.9 billion short-term), $30 million of subsidiary preferred stock and $50 million of cash: net debt of about $22.5 billion, or $68.5 per share on 328.9 million shares. The share count has risen from 316.5 million in 2024 because the company sold $762 million of stock in 2025. Maturities are heavy: $11.5 billion falls due between 2026 and 2030 ($1.5 billion in 2026, $2.1 billion in 2027, $3.2 billion in 2028, $2.9 billion in 2029, $1.7 billion in 2030). Existing debt is cheap: cash interest was about 4.1% of average 2025 borrowings, and the company's subsidiaries issued new notes at 5.20% in April 2025. We reduced the debt figure by about $1.6 billion ($4.9 per share) for that advantage in the base and bull cases, assuming the current rates run to each maturity and that the post-2030 maturities average about 14 years. That figure is an estimate, not something stated in the filing. Base case, about $78 per share. The existing business keeps producing $2.80 billion a year with no growth credited: worth about $46.6 billion, less net debt of $22.5 billion, plus the $1.6 billion debt advantage, leaving about $25.7 billion for shareholders. We credit no growth because the $37.5 billion plan still needs regulatory approvals and money that has not yet been raised, and because proposed contracts with very large data-center customers (500 MW or more, with proposed returns of 10.48% to 10.98% on a 57% equity layer) were still awaiting Wisconsin approval at the time of the annual report. After year ten the same level continues: a rate-regulated monopoly that recovers depreciation in rates and replaces plant as it wears. Bear case, about $64 per share. Four named pressures. First, cash taxes deferred by the build-out averaged $449 million in 2024 and 2025 against $298 million a year over 2016 to 2025; we cut $151 million a year permanently. Second, Illinois has produced plant write-downs in each of the last three years ($178.9 million in 2023, $12.1 million in 2024, $130.0 million in 2025) and a $75 million customer refund in 2025; we repeat a $75 million cash hit for five years. Third, two further years at 6% below normal, matching the largest earnings dip in the record (2023 net income fell 5.5%). Fourth, no benefit from cheap debt. The business is then worth about $43.5 billion, owes $22.5 billion, leaving $21.0 billion, or $64 per share. Cash flow stays well above the roughly $0.9 billion interest bill. Utility earnings have little cyclical history in these filings (2020 revenue fell 3.7% while net income rose), so the downturn is modest; the larger risk is regulatory and financing. Bull case, about $96 per share. The 2025 level of $2.91 billion holds, and the money already spent in 2025 beyond depreciation (about $3.3 billion including the $406 million Hardin III purchase) earns 7% a year, roughly what the business earned on its total capital in 2025, adding $233 million. The business is then worth about $52.5 billion, owes $22.5 billion, plus the $1.6 billion debt advantage, leaving about $31.5 billion. This needs regulators to allow recovery of that spending. Nothing from the future capital plan or the data-center tariffs is included. Change since the last analysis. The earlier figures ($60, $86, $117) were built on a different basis and are not comparable. In the business itself: shares outstanding are up about 4% since 2024, debt has grown to $22.5 billion net, the capital plan is $37.5 billion, and first-half 2026 results are ahead of the prior year. How we arrived at the margin-of-safety price. We are fairly confident in the level of cash earnings: ten years of data, a regulated monopoly, and a stronger first half in 2026. But shareholders are the last claim behind $22.5 billion of debt, so a 5% change in business cash flow moves the per-share value by roughly 10%. The worst plausible outcome is that Illinois-style disallowances reach Wisconsin while the company spends heavily and must keep selling shares; the business would survive because it supplies essential service under a regulated monopoly, but equity holders would be diluted. The things we are most likely to be wrong about are the level (using the middle of 2022 to 2025, $2.42 billion, the shares would be worth about $59), the deferred taxes (the bear case) and the debt advantage (about $5 per share). The price assumes a holding period of about three years, during which the company pays about $3.54 a share in dividends ($1.15 billion in 2025), roughly $10.60 in total. From $48, three years of dividends plus a value of $78 at the end implies about 23% a year; at the bear value of $64, about 16% a year; and if the level were the lower one ($59), about 13% a year. That is why the margin-of-safety price is $48.