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A Pre-Earnings Analysis of FirstEnergy and Its Growth Prospects

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Part 3
A Pre-Earnings Analysis of FirstEnergy and Its Growth Prospects PART 3 OF 7

Factors That Could Drive FirstEnergy’s 1Q17 Earnings

FirstEnergy’s earnings

According to analysts, FirstEnergy (FE) is estimated to report earnings of $0.74 per share for the quarter ended March 31, 2017. For 1Q16, FirstEnergy reported earnings of $0.80 per share.

Weakness in the competitive power segment has severely dented utilities’ performance in the last few quarters. In 1Q17, FirstEnergy may see continued softness in the segment mainly due to subdued wholesale power prices.

Factors That Could Drive FirstEnergy’s 1Q17 Earnings

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Earnings drivers

Hybrid utilities usually have fairly large exposure to competitive operations compared to regulated utilities (XLU). Their performance has been under severe pressure in the last few quarters due to weak wholesale power prices, which were triggered by low gas prices.

FirstEnergy’s 1Q17 earnings are expected to be driven mainly by its regulated transmission and distribution operations. Just like in the last few quarters, these segments may see a strong performance due to consistent investments in its regulated rate base.

Increased focus on regulated operations may drive FirstEnergy’s earnings in the long term. Higher earnings contributions from regulated operations give earnings stability and predictability.

The revival of wholesale power prices and an increase in power consumption could result in a significant boost to FirstEnergy’s competitive operations in the long term. Currently, these factors aren’t expected to change drastically.

FirstEnergy’s peer and the largest hybrid utility in the US, Exelon (EXC) is expected to report its quarterly earnings on May 5, 2017.

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