) shares shed 3.2% closing at $31.13 per share on Jan 22, 2014.
The decline was primarily due to the market's negative response
to FirstEnergy's decision to lower its quarterly dividend rate
and narrow its 2013 operating earnings guidance.
AES CORP (AES): Free Stock Analysis Report
ALLETE INC (ALE): Free Stock Analysis Report
FIRSTENERGY CP (FE): Free Stock Analysis
WISC ENERGY CP (WEC): Free Stock Analysis
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The board of directors of FirstEnergy decreased its quarterly
dividend rate by 34.5% to 36 cents per share from the previous
rate. On an annualized basis, new dividend rate will be $1.44 per
share. The new annual dividend yield will be 4.6%, which will be
higher than the industry average of 2.2%. The revised dividend
will be paid on Mar 1, 2014, to shareholders of record as of Feb
The company intends to retain the funds to meet its long-term
capital requirements for regulated operations while managing
current market conditions as well as increased government
regulations. We believe this initiative will help FirstEnergy to
maintain its future fund needs.
In addition, FirstEnergy narrowed its 2013 operating earnings
guidance in the range of $2.95 - $3.05 per share from the earlier
projection of $2.90 - $3.10 per share.
FirstEnergy provided 2014 operating earnings guidance in the
range of $2.45 - $2.85 per share, lower than the 2013 earnings
We note that FirstEnergy has already taken several initiatives
including reduction in operating and maintenance expenses as well
as planned sale of generating assets. However, a stalemate in
load growth at the company's utilities as well as decreasing
energy prices resulting from a multi-year economic downturn has
forced the company to revise its 2013 operating earnings
guidance. Moreover, an increase in allocation for storm related
expenses and delay in expected recovery casts shadow on the
company's future results.
In the coming four years, FirstEnergy plans to invest
approximately $4.2 - $4.6 billion as transmission capital
expenditure. The company intends to deploy a major chunk of the
fund for the maintenance of its existing assets, thereby
providing uninterrupted services to its customers.
FirstEnergy currently has a Zacks Rank #3 (Hold). However, some
better-ranked stocks in the same sector include
Wisconsin Energy Corp.
The AES Corp.
). While Wisconsin Energy holds a Zacks Rank #1 (Strong Buy), The
AES Corp. and ALLETE carry a Zacks Rank #2 (Buy).