Core Viewpoint - MGE Energy (MGEE) is a stable utility company with a strong dividend growth history and a solid financial position, despite facing challenges in Q2 2024 due to unfavorable weather conditions and rising costs [2][3][10] Financial Performance - MGEE's operating revenue for Q2 2024 decreased by 1.5% year-over-year to $145.7 million, with electric operating revenue falling by 0.9% to $120.4 million and natural gas operating revenue declining by 4.5% to $25.1 million [3][4] - The diluted EPS dropped by 16.5% year-over-year to $0.66, missing analyst expectations by $0.29, primarily due to higher fuel costs and increased depreciation and maintenance expenses [4][5] Growth Outlook - The Madison area, where MGEE operates, is projected to grow by over 1% annually, which is more than double the U.S. average of approximately 0.5% [5] - MGEE plans to invest $1.2 billion in capital through 2028 to support customer growth, which is expected to compound at a mid to high 1% rate annually [5] - Analysts project a 13.5% increase in diluted EPS to $3.69 for 2024, followed by 9.2% growth to $4.03 in 2025 and 8.9% growth to $4.39 in 2026 [5] Valuation - MGEE's shares are currently undervalued, with a fair value estimated at $93 per share compared to a market price of $85, indicating an 8% discount to fair value [6] - The company's current P/E ratio of 23.1 is below its 10-year average of 25, suggesting potential for price appreciation [6] Dividend Profile - MGEE has a forward dividend yield of 2%, which is lower than the utility sector median of 3.8%, but the company's payout ratio is expected to be in the mid-to-high 40% range, indicating strong dividend safety [7] - The company has a nearly 50-year dividend growth track record, positioning it to potentially become a Dividend King by the end of next year [7] Investment Thesis - MGEE is viewed as a buy due to its strong fundamentals, growth potential, and secure dividend, with expectations of double-digit annual total returns as it approaches Dividend King status [10]

Company Performance - MGE reported quarterly earnings of $0.66 per share, missing the Zacks Consensus Estimate of $0.95 per share, and down from $0.79 per share a year ago, representing an earnings surprise of -30.53% [1] - The company posted revenues of $145.71 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 3.69%, and down from $148 million year-over-year [2] - MGE has not surpassed consensus EPS or revenue estimates over the last four quarters [2] Stock Performance - MGE shares have increased approximately 18% since the beginning of the year, outperforming the S&P 500's gain of 9.9% [3] - The current consensus EPS estimate for the upcoming quarter is $1.17 on revenues of $163.82 million, and for the current fiscal year, it is $3.69 on revenues of $674.38 million [7] Industry Outlook - The Utility - Electric Power industry is currently in the top 37% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact MGE's stock performance [5][6]

Earnings Announcement - MGE Energy, Inc. announced its second quarter 2024 earnings on August 7, 2024[5] Stock Information - The company is listed on the NASDAQ Stock Market under the trading symbol MGEE[2] Financial Reporting - No financial statements of businesses acquired or pro forma financial information were reported[6]

Financial Performance - MGE Energy's earnings for the three months ended June 30, 2024, were $23.8 million or $0.66 per share, a decrease from $28.7 million or $0.79 per share in the same period last year[98]. - MGE Energy's net income for the six months ended June 30, 2024, was $57.6 million, down from $59.8 million in the same period last year[99]. - Electric revenue decreased by $1.1 million to $120.383 million for the three months ended June 30, 2024, compared to $121.492 million in the same period of the prior year, reflecting a 0.9% decline[116]. - Gas revenue decreased by $1.2 million to $25.116 million for the three months ended June 30, 2024, compared to $26.291 million in the same period of the prior year, a decline of 4.5%[121]. - Electric revenues decreased by $2.2 million during the six months ended June 30, 2024, with total retail electric revenues at $236.5 million, a 0.9% decline from $238.7 million in the prior year[135]. - Gas revenue decreased by $26.0 million, totaling $100.3 million, a 20.6% decline compared to $126.3 million in the prior year[141]. Sales and Revenue Trends - Electric utility earnings decreased due to unfavorable weather, with residential sales down approximately 4% for both the three and six months ended June 30, 2024[100]. - Gas utility earnings were impacted by lower retail sales, which decreased approximately 8% due to warmer than normal weather in the first quarter of 2024[101]. - Residential sales volume decreased by approximately 4% year-over-year, driven by warmer weather conditions in April 2024 compared to April 2023[117]. - Residential electric sales volume decreased by 3.6%, while commercial sales increased by 0.9%[135]. Rate Changes - The PSCW approved a 1.54% increase to electric rates and a 2.44% increase to gas rates for 2024, with further increases planned for 2025[102]. - The average retail rate for electric customers increased by approximately 1.54% in December 2023, resulting in $1.2 million higher rates charged during the three months ended June 30, 2024[117]. - The average retail rate per therm for gas increased by approximately 4% year-over-year, reflecting a decrease in natural gas commodity costs[123]. - The average retail rate per therm for gas customers decreased approximately 14% compared to the same period in the prior year[143]. Operational Expenses - Operations and maintenance expenses increased by $4.7 million to $X million during the three months ended June 30, 2024, primarily due to increased customer accounts costs and transmission costs[125]. - Operations and maintenance expenses increased by $8.8 million, primarily due to increased customer accounts costs of $4.6 million and increased transmission costs of $2.9 million[145]. - Electric depreciation expense increased by $1.5 million, attributed to the placement of Badger Hollow II in service in December 2023[128]. - Electric depreciation expense increased by $3.2 million, attributed to the purchase of West Riverside and the in-service date of Badger Hollow II[148]. Renewable Energy and Environmental Goals - MGE aims for an 80% carbon reduction target by 2030 from 2005 levels, focusing on growing renewable generation and transitioning to natural gas[107]. - MGE plans to retire Columbia Unit 1 and Unit 2 by June 2026 as part of its transition away from coal[108]. - MGE continues to expand renewable generation, with a 29% increase in renewable generation driven by new sources including Badger Hollow II[139]. - MGE has set a goal to achieve net-zero methane emissions from its natural gas distribution system by 2035[111]. Capital and Financing - MGE has $330 million of remaining regulatory authority to issue long-term debt for financing authorized utility capital expenditures[113]. - Capital expenditures for MGE Energy and MGE totaled $111.6 million during the six months ended June 30, 2024, reflecting an increase of $3.9 million from the same period in 2023[161]. - Cash provided by operating activities was $130.4 million for the six months ended June 30, 2024, compared to $127.0 million in the prior year[157]. - MGE Energy's capitalization ratios as of June 30, 2024, were 59.9% common shareholders' equity and 37.0% long-term debt[165]. Regulatory and Compliance Issues - MGE is monitoring potential disruptions in solar procurement due to new tariffs and regulations, which may impact costs and timelines for solar projects[112]. - The Uyghur Forced Labor Protection Act may impact the supply of solar panels, but MGE's suppliers have met compliance requirements[173]. - The U.S. Department of Commerce found that Chinese manufacturers were circumventing tariffs on solar panels, leading to potential cost increases for MGE's solar projects[174]. - The Biden Administration announced an increase in tariffs on solar cells and modules from 25% to 50%, which may affect MGE's future solar projects[174]. - MGE expects to request recovery of any cost increases in future rate proceedings due to potential disruptions from tariffs and compliance issues[174]. Other Income and Investments - Nonregulated energy operations segment net income increased to $6.0 million for the three months ended June 30, 2024, compared to $5.5 million in the same period of the prior year[130]. - Nonregulated energy operations segment net income increased to $11.9 million for the six months ended June 30, 2024, compared to $11.0 million in the same period of 2023[150]. - Other income from transmission investment operations increased to $2.8 million for the three months ended June 30, 2024, compared to $2.6 million in the same period of the prior year[131]. - Other income increased by $0.9 million due to decreased investment distribution losses from venture capital funds compared to the prior year[132]. - Other income from all other operations increased by $1.1 million, primarily due to decreased investment distribution losses from venture capital funds[152]. Market Risks and Future Outlook - MGE's share of ATC's earnings reflected a $0.6 million reduction in reserves due to the May 2020 FERC order[170]. - MGE's estimated possible loss related to the First Complaint Period is approximately $0.9 million, inclusive of interest and net of tax[171]. - MGE derived approximately 6.7% of its net income from its investment in ATC for the six months ended June 30, 2024[172]. - There were no material changes to the market risks disclosed in the 2023 Annual Report on Form 10-K[175]. - MGE Energy expects to begin issuing new shares of common stock in the second half of 2024 as part of its Direct Stock Purchase and Dividend Reinvestment Plan[156]. - MGE's share of ATC's earnings for the six months ended June 30, 2023, was 6.2% of net income[172].

The market expects MGE (MGEE) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended June 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report. On the other hand, if they miss, the stoc ...

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns. Headquartered in Madis ...

MGE Energy Inc.'s (MGEE) strong fundamentals and a solid financial position with favorable growth estimates make it a good investment choice. Growth Projections The Zacks Consensus Estimate for 2024 and 2025 sales implies growth of 2.4% and 3.2%, respectively, from the year-ago levels. The company's return on equity for the trailing 12 months is 10.6%, comparing favorably with the industry's 9.91%. This uptrend reflects MGEE's higher efficiency in utilizing its shareholders' funds than its peers. MGE Energy ...

For those looking to find strong Utilities stocks, it is prudent to search for companies in the group that are outperforming their peers. MGE (MGEE) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? Let's take a closer look at the stock's year-todate performance to find out. MGE is one of 106 individual stocks in the Utilities sector. Collectively, these companies sit at #9 in the Zacks Sector Rank. The Zacks Sector Rank ...

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments. Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, ...

MGE Energy Inc.'s (MGEE) strong fundamentals and a solid financial position with favorable growth estimates make it a good investment choice. MGE Energy currently carries a Zacks Rank #2 (Buy). Growth Projections The Zacks Consensus Estimate for 2024 earnings has moved north by 0.3% in the past 60 days and is currently pegged at $3.69 per share. The Zacks Consensus Estimate for 2024 sales is pegged at $706.8 million, implying year-over-year growth of 2.4%. Dividend MGE Energy continues to reward its shareho ...