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FirstEnergy Reported Higher Q2 2018 Earnings Due to the Weather

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Earnings beat the estimates

FirstEnergy (FE) reported its second-quarter financial results on July 31 after the markets closed. The company reported an adjusted EPS of $0.62 for the quarter ending on June 30. FirstEnergy reported earnings of $0.44 per share in the second quarter of 2017. The company beat analysts’ earnings and revenue estimates.

The earnings increased in the second quarter mainly due to favorable weather. A higher regulated commodity margin and new rates that came into effect during the quarter also helped FirstEnergy’s second-quarter earnings. Higher depreciation had a negative impact on FirstEnergy’s earnings during the quarter.

FE stk

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Earnings drivers

FirstEnergy posted total revenues of $2.70 billion during the second quarter—compared to revenues of $2.62 billion in the second quarter of 2017. The cooling degree days in FirstEnergy’s operating areas were 22% higher than in the same period last year and 30% above normal.

The favorable weather during the quarter boosted electricity consumption across all of FirstEnergy’s customer classes. Residential sales increased 8.6% and deliveries to commercial customers increased 1.6%. Among industrial customers, electricity usage soared for the eighth consecutive quarter with a 2% rise mainly from the shale gas and steel sectors.

FirstEnergy’s total operating expenses declined marginally to $2.02 billion for the second quarter—compared to operating expenses of $2.05 billion in the second quarter of 2017.

FirstEnergy’s management has given an EPS guidance of $2.25–$2.55 for 2018. Going forward, the company expects to grow its EPS 6%–8% per year until 2021, which is more than utilities’ (XLU) (IDU) average.

FirstEnergy stock has risen ~15%, while broader utilities have risen marginally in 2018.

Duke Energy (DUK), the second-largest utility by market capitalization, is expected to report its earnings on August 2. To learn more, read Duke Energy’s Expected Q2 2018 Earnings and Growth Drivers.

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