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How’s FirstEnergy Stock Placed Compared to Its Peers?

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FirstEnergy’s (FE) increased focus on regulated operations helped the company. In 2018, FirstEnergy’s earnings increased ~19% compared to 2017. The company’s business mix improved when it separated its competitive segment last year. FirstEnergy had a large portion of its earnings coming from competitive operations. However, the company’s earnings will likely become more stable and predictable due to an increased focus on regulated operations.

FE eps

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Earnings drivers

FirstEnergy posted total revenues of $11.26 billion in 2018—compared to $10.93 billion in 2017. Favorable weather drove the electricity consumption, while higher industrial sales in 2018 boosted FirstEnergy’s top line.

For the fourth quarter, FirstEnergy reported an operating EPS of $0.50, which beat the consensus estimate for the quarter. In the fourth quarter of 2017, FirstEnergy posted an EPS of $0.58. Higher regulated distribution operations had a positive impact on the company’s earnings, while higher operating expenses dented the earnings.

FirstEnergy’s competitive segment FirstEnergy Solutions filed for Chapter 11 bankruptcy protection in March 2018.

FirstEnergy’s management maintained its 2019 earnings guidance range of $2.45–$2.75 per share, which indicates flattish YoY growth. The company has given a long-term earnings growth target of 6%–8% through 2021. FirstEnergy aims for a targeted dividend payout ratio of 55%–65%, which is marginally lower than its peers.

In this series, we’ll see how FirstEnergy stock is placed compared to peer utilities (XLU) for the future. We’ll discuss the company’s historical performance, dividend profiles, and target price.

Next, we’ll discuss FirstEnergy’s current valuation.

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