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A Pre-Earnings Analysis of FirstEnergy and Its Growth Prospects

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A Pre-Earnings Analysis of FirstEnergy and Its Growth Prospects PART 1 OF 7

A Look at FirstEnergy’s 1Q17 Expected Revenues and Drivers

FirstEnergy: Revenues

Based in Akron, Ohio, hybrid utility FirstEnergy (FE) is expected to report its 1Q17 financial results on April 27, 2017. According to analysts’ estimates, FirstEnergy is forecast to report total revenues of ~$3.8 billion for the quarter. 

In 1Q16, FE reported revenues of ~$3.9 billion. FirstEnergy saw beats of analysts’ revenue estimates in two out of the last seven quarters.

A Look at FirstEnergy’s 1Q17 Expected Revenues and Drivers

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Factors that could drive FirstEnergy’s revenues

Lower capacity prices and prolonged weakness in wholesale power prices may dent hybrid utilities’ top lines. FirstEnergy obtains a large portion of its revenues from its competitive operations. Lower electricity consumption growth has been hurting hybrid utilities’ (EXC) (FE) (PEG) revenues for the last several quarters.

In the last few quarters, FirstEnergy’s performance in regulated transmission and distribution has been relatively better. It has managed to offset weakness in the wholesale business to some extent.

Weather plays an important role in utilities’ earnings, as it drives electricity consumption. In the US, heating degree days in 1Q17 were 5% lower than the heating degree days in 1Q16. Milder weather could have a negative impact on utilities’ (XLU) revenues in the first quarter.

Favorable weather in 4Q16 drove consumption, resulting in rises of 8% and 3% in FirstEnergy’s residential and commercial sales, respectively, compared to 4Q15. FE’s industrial sales, its primary customer segment, posted a 2% rise year-over-year in 4Q16, primarily due to increased consumption in the shale gas and steel sectors.

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