Is WEC Energy Group (WEC) Still a Buy After Its Recent Pullback?

The recent pullback in WEC Energy Group's (WEC) stock price has sparked renewed debate about its valuation and long-term prospects. With the share price trading at approximately $103.94 as of late 2025, down 14% from its 52-week high of $118.19, investors are reassessing whether this decline represents a buying opportunity or a warning sign. To evaluate this, we must scrutinize WEC's intrinsic value estimates, earnings momentum, and the regulatory risks that could impede its capital expenditure plans.

Valuation Realism: A Tale of Two Models

WEC's intrinsic value estimates present a mixed picture. According to AlphaSpread, the Discounted Cash Flow (DCF) model suggests an intrinsic value range of $95.71–129.34, while the relative valuation model places it at $166.55. The average of these two approaches yields a fair value estimate of $131–131.50, significantly above the current market price. Analysts have further reinforced this view, with a 12-month price target of $121.74, implying a potential 17% upside.

However, the Projected Free Cash Flow (FCF) model complicates this narrative. Gurufocus calculates an intrinsic value of $36.34 under this framework, far below the current price, while the Price-to-Projected-FCF ratio of 3.2 suggests overvaluation. This divergence highlights the importance of context: WEC's capital-intensive strategy, which includes $36.5 billion in planned investments from 2026–2030, may justify higher multiples if execution risks are mitigated.

The Dividend Discount Model (DDM) offers a more neutral perspective, estimating intrinsic value at $107, with the current share price of $108 trading near fair value. This suggests that while WEC's dividend yield is attractive, its growth potential hinges on capital deployment rather than immediate cash returns.

Earnings Momentum and Strategic Resilience

WEC's third-quarter 2025 earnings underscore its operational resilience. Earnings per share (EPS) rose to $0.83, a $0.01 increase year-over-year, and the company reaffirmed its full-year guidance of $5.17–5.27 per share. This stability is underpinned by its $36.5 billion capital plan, which aims to drive 7–8% annual EPS growth through investments in renewable energy, transmission, and data center infrastructure.

The company's ability to secure rate increases also bolsters its financial outlook. For instance, Alliant Energy, a WEC subsidiary, recently secured settlements allowing for 5.4% and 5% annual electric rate hikes in 2026 and 2027, respectively. These adjustments, though lower than initially requested, provide a predictable revenue stream to fund capital projects.

Regulatory Risks: A Double-Edged Sword

Despite these positives, WEC faces significant regulatory headwinds. The Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act (OBBBA) have imposed stringent timelines for renewable energy projects to qualify for tax credits. Under revised rules, solar and wind projects must begin construction by July 4, 2026, to remain eligible. WEC, like many utilities, is accelerating its capital plans to meet these deadlines, but delays in permitting or supply chain bottlenecks could derail execution.

Moreover, Wisconsin ratepayers are already burdened with $1 billion in stranded costs from retired coal plants, which could strain future rate cases and investor confidence. While WEC's VLC tariff proposal aims to address large customer demands without overburdening ratepayers, regulatory approval remains pending.

The P/E Premium: Justified or Overstretched?

WEC's trailing P/E ratio of 20.8 exceeds both its peer average and the global utilities sector average. This premium reflects investor optimism about its growth trajectory but also raises questions about sustainability. If regulatory delays or rising financing costs slow capital deployment, the stock could face downward pressure. Conversely, successful execution of its $36.5 billion plan could justify the multiple, particularly as demand for clean energy infrastructure accelerates.

Conclusion: A Calculated Buy?

WEC's recent pullback appears to offer a compelling entry point for long-term investors, provided they are willing to navigate regulatory uncertainties. The intrinsic value estimates, supported by DCF and relative valuation models, suggest the stock is undervalued, while its earnings momentum and capital plans position it to capitalize on the clean energy transition. However, the risks-ranging from IRA compliance challenges to stranded asset liabilities-cannot be ignored.

For those with a medium-term horizon and a tolerance for regulatory volatility, WEC remains a buy. The key will be monitoring the outcomes of pending rate cases, the pace of renewable project approvals, and the company's ability to manage its legacy costs. In a sector where policy and execution are as critical as fundamentals, WEC's success will depend on its agility in navigating these crosscurrents.