We reaffirm our Neutral recommendation on Ohio utility major
). The company posted mixed outcomes in the third quarter 2012
with the top-line falling short of the Zacks Consensus Estimate
while the bottom-line beating it.
We believe the company's multiple ventures in Ohio like the
non-binding contract with American Municipal Power for the
construction and development of an 873 megawatt natural gas
peaking facility and the proposed building of an eco-friendly
transmission control center will support its business growth
However, weather variations especially winter storms and
regulatory obligations are possible negative near-term triggers
that might upset the company's top-line progress.
FirstEnergy's rise in customer count by 42% in the third
quarter 2012 is impressive and we anticipate the addition of 43
new communities in Ohio and 81 communities in Illinois will
augment the company's near-term earnings flow. Moreover, a sound
hedging profile is expected to reassure stable returns in the
FirstEnergy's competitive energy business is hedged at a
respective 99% and 78% for the rest of 2012 and for 2013.
Nonetheless, the ongoing stalemate in the U.S.
macro-environment could constrain the company's growth potential
with price sensitivities being a recurring risk. FirstEnergy
presently retains a short-term Zacks #3 Rank (Hold rating).
The Zacks Consensus Estimates for the fourth quarter and full
year 2012 currently stand at 85 cents and 3.34 per share,
FirstEnergy's pro forma earnings expectation for 2012 is
expected to be in the band of $3.30 to $3.40 per share. Operating
earnings for 2013 are expected in the range of $2.85 to $3.15 per
Another Zacks #3 Ranked utility player,
NextEra Energy Inc.
) is also looking to improve its natural gas prospects in
Florida. The company recently disclosed its plans for the
construction of a natural gas pipeline to supply more power to
its Florida customers.
With a market capitalization of $17.42 billion, FirstEnergy
has 20,000 employees. Headquartered in Akron, the company through
its subsidiaries engages in the generation, transmission, and
distribution of electricity.
FIRSTENERGY CP (FE): Free Stock Analysis
NEXTERA ENERGY (NEE): Free Stock Analysis
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