According to the Wall Street analyst consensus, FirstEnergy Corporation (FE) has a one-year price target of $36.10. This implies a rise of 8% over the coming one year compared to its current market price of $33.46 as of February 17, 2016.
Of the 23 analysts tracking FirstEnergy, 13 have given it “hold” recommendations, while nine have given it “buy” recommendations. Only one analyst has given FirstEnergy a “sell” recommendation.
Among FirstEnergy’s peer utilities (FXU), Exelon Corporation (EXC) has a one-year price target of $33.60. This reflects an estimated rise of 8% in one year. EXC is currently trading at $31. Large-cap peer NextEra Energy (NEE), by comparison, has an estimated price target of $120.70, which amounts to a possible upside of 7%. NEE is currently trading at $111.67.
Outlook for 2016
FirstEnergy’s management has provided an earnings guidance range for 1Q16 at $0.75–$0.85 per share. Over the last few quarters, FirstEnergy has seen its earnings suffer from mild weather. To cope with this, FirstEnergy has reduced its sales to residential customers from 3Q14, which may de-risk FE’s business mix, as the residential sales are most affected by weather. However, it may also have to give up the higher margins offered by its residential class.
FE’s management targets 80% earnings from its regulated utilities (JXI) and aims to achieve 20% average annual earnings growth from its transmission business. FE has robust business contracts in place in its competitive segment for the next two years, and regulators’ decision on FirstEnergy’s Ohio electric security plan is expected to have a substantial impact on the company’s earnings starting in 2H16.
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