We retain our Neutral recommendation on
). The utility service provider currently carries a Zacks Rank #3
Why the Reiteration?
FirstEnergy reported mixed financial results in the first
quarter of 2013 with earnings beating our expectation while
revenue trailing it. The reiteration also takes into
consideration strict pro-environment laws that will challenge the
company's coal powered generation business.
We, nevertheless, believe FirstEnergy's efforts to strengthen
its energy marketing business will boost profitability. The
strategy to shift to higher value retail channels will contribute
to stable margins.
Furthermore, FirstEnergy's string of infrastructure
modernization projects will improve its power service quality
which will lead to customer retention. These efforts might also
aid in attracting new customers to the company's services thereby
expanding its customer portfolio.
Meanwhile, its upgrade initiatives will be put to test given
the severe storms that are expected in the coming months as
projected by the National Oceanic Atmospheric Administration.
FirstEnergy maintained its earnings guidance range of $2.85 to
$3.15 per share for 2013 reflecting its confidence in the
investments made in transmission assets. However, we believe the
still recovering U.S. economy will keep electric prices at a
moderate level which will affect the company's revenue
The Zacks Consensus Estimate projects a 10.3% year-over-year
decline in 2013 earnings to $2.99 per share from $3.33 per share
Other Stocks to Consider
Other utility industry players looking good at the moment are
Zacks Ranked #2 (Buy)
Black Hills Corporation
DTE Energy Company
ALLETE INC (ALE): Free Stock Analysis Report
BLACK HILLS COR (BKH): Free Stock Analysis
DTE ENERGY CO (DTE): Free Stock Analysis
FIRSTENERGY CP (FE): Free Stock Analysis
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