FirstEnergy (FE) stock fell 4% on April 4 after the bankruptcy court rejected a restructuring plan for the utility’s competitive segment. According to the Wall Street Journal, the bankruptcy judge rejected FirstEnergy’s $4 billion restructuring plan to pull out FirstEnergy Solutions from Chapter 11 protection. The judge mentioned that the plan is “patently unconfirmable.” The judge said that FirstEnergy is misusing the bankruptcy law to disengage from its uneconomical power plants. The latest order suggests that FirstEnergy Solutions will be under Chapter 11 longer.
FirstEnergy Solutions filed for Chapter 11 bankruptcy protection last year. In 2018, FirstEnergy reported an adjusted EPS of $2.59, which implies a rise of 19% YoY (year-over-year).
So far, FirstEnergy stock has risen ~5% this year. The stock has significantly underperformed broader utilities (XLU). The recent weakness in FirstEnergy stock has pushed it below the 50-day moving average level, which could concern investors. FirstEnergy’s 200-day level close to $38.1 could act as a support for the stock in the short term. Currently, FirstEnergy stock is trading at an RSI of 21, which indicates that it’s in the oversold zone.
There was a significant rise in FirstEnergy’s volumes on April 4. More than 12 million shares exchanged hands on April 4—compared to the company’s three-month average volume of ~5 million.