Technology

FirstEnergy (FE) Up 2.6% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for FirstEnergy (FE). Shares have added about 2.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is FirstEnergy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

FirstEnergy's Q2 Earnings Beat Estimates, Revenues Miss

FirstEnergy delivered second-quarter 2020 operating earnings of 57 cents per share, which beat the Zacks Consensus Estimate of 55 cents by 3.64%. Quarterly earnings, however, declined 6.56% from the year-ago quarter’s figure.  

On a GAAP basis, the company’s earnings amounted to 57 cents per share compared with 58 cents earned in the prior-year quarter.

Total Revenues

FirstEnergy generated revenues of $2,522 million in the second quarter, which missed the Zacks Consensus Estimate of $2,562 million by 1.56%. The figure, however, inched up 0.24% from $2,516 million in the year-ago quarter.

Highlights of the Release

Residential sales increased 17.1% on a year-over-year basis. Commercial deliveries declined 14.4% and industrial sales fell 11.7% year over year. Total distribution deliveries dipped 3.1% from the prior-year quarter’s level due to the ongoing pandemic impact on commercial and industrial sales.

Total operating expenses in the quarter under review came in at $2,007 million, up 3.9% from $1,931 million in the prior-year quarter.

In the second quarter, operating income was $515 million, down 12% from $585 million in the year-ago quarter.

Financial Update

FirstEnergy had cash, cash equivalents and restricted cash worth $165 million as of Jun 30, 2020 compared with $679 million on Dec 31, 2019.

Long-term debt and other long-term obligations as of Jun 30, 2020 were $21,980 million, up from $19,618 million on Dec 31, 2019.

Net cash provided from operating activities in the first half of 2020 was $150 million compared with $625 million in first-half 2019.

Guidance

Management reaffirmed 2020 earnings per share guidance in the range of $2.40-$2.60 with the mid-point being higher than the current Zacks Consensus Estimate of $2.46. Also, the company issued third-quarter earnings outlook in the 73-83 cents band with the current Zacks Consensus Estimate of 74 cents being slightly above the lower end.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, FirstEnergy has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, FirstEnergy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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

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