Markets

FirstEnergy (FE) Strong on Residential Demand & Investments

FirstEnergy Corporation’s FE expanding regulated base and increasing transmission lines are expected to boost its earnings. Also, the company’s efforts to reduce emission levels are likely to be beneficial in the future.

For 2020, the company’s earnings estimates have moved 1.6% north to $2.54 per share in the past 60 days. Additionally, FirstEnergy has a trailing four-quarter earnings surprise of 6.59%, on average.

What’s Driving the Stock?

FirstEnergy’s efforts to expand its regulated generation mix lent consistency to its long-term earnings. The utility’s transmission and distribution operations are spread across 65,000 square miles in six states and its rate structure provides stability during an economic crisis.

Due to stay-at-home orders, FirstEnergy is experiencing an increase in residential demand. Remarkably, the company’s 65% distribution revenues are generated from residential customers, which helped it offset the decline in other customer groups’ demand due to the ongoing pandemic.

The utility player reaffirmed its long-term CAGR projection of 6-8% for operating earnings during the 2018-2021 forecast period and expected the same to be 5-7% for the 2022-2023 period. The company’s investment in strengthening its transmission and distribution lines will enable it to serve its six million customers more efficiently. It aims to spend $17.6 billion on solidifying its transmission and distribution network for the 2018-2023 time period.

FirstEnergy is focused on lowering its emission levels and undertook initiatives to that end. As of Feb 29, 2020, it achieved an 80% reduction in its CO2 emissions from the 2005 base line. Other electric utilities like Alliant Energy Corporation LNT, CMS Energy Corporation CMS and Pinnacle West Capital PNW are also making sustained efforts to expand their renewable portfolio alongside reducing toxic emissions.

Woes

However, FirstEnergy still possesses coal-fired generating plants that are required to comply with the federal, state and local environmental statutes, thereby elevating its costs. Thus, a likely increase in the compliance costs might affect the company’s profitability. The risks related to unplanned outages and an unexpected delay in completing the ongoing capital project remain headwinds.

Zacks Rank & Price Performance

The stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, shares of the company have lost 5.1% against the industry’s rise of 7.4%.

 

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
FirstEnergy Corporation (FE): Free Stock Analysis Report
 
CMS Energy Corporation (CMS): Free Stock Analysis Report
 
Pinnacle West Capital Corporation (PNW): Free Stock Analysis Report
 
Alliant Energy Corporation (LNT): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More