FirstEnergy Corporation FE continues to benefit from a growing regulated base, and the expansion of distribution and transmission lines is expected to improve operations further. The company’s strategic investment will likely increase grid reliability and enable efficient customer service.

However, this Zacks Rank #3 (Hold) company faces risks related to delays in the base rate request approval and seasonal factors.

Tailwinds for FirstEnergy

The utility’s efforts to expand its regulated generation mix stabilized its earnings trajectory. In the past few years, the company witnessed a successful broadening of regulated operations and a transition to become a fully-regulated utility company. FirstEnergy is gaining from improving economic conditions and rising demand from commercial and industrial groups compared with the previous year.

The company’s ‘Energize365’ is a multi-year grid evolution platform, focused on enhancing customer experience while maintaining its strong affordability position with rates at or below its in-state peers. With planned investments of $26 billion between 2024 and 2028, the company will install advanced equipment and technologies to strengthen and modernize its transmission and distribution infrastructure.

FirstEnergy witnessed a filed settlement in April 2024 of its new four-year Grid Modernization II program with the Ohio commission. With a four-year investment of $421 million, FE aims to expand the deployment of Grid Modernization technologies and reduce the frequency of power outages. This investment also includes the deployment of 1.4 million smart meters to further deliver safe, reliable power and promote modern experiences for customers.

FE’s Headwinds

The sale of electric power is generally a seasonal business, and weather patterns can have a material impact on FirstEnergy’s Regulated Distribution segment’s operating results. Demand for electricity in the service territories historically peaks during the summer and winter months. Mild weather conditions may result in reduced power sales and consequently lower revenues, earnings and cash flow.

FirstEnergy cannot guarantee that any base rate request filed will be granted in whole or part. Any denial of, or delay in, base rate request could restrict the company from fully recovering its service costs. This might adversely impact its operations, cash flows and financial condition.

FE’s Stock Price Performance

In the past six months, shares of FirstEnergy have risen 10.6% compared with the industry’s 12.1% growth.

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Stocks to Consider

Some better-ranked stocks from the same industry are Vistra Corp. VST, which sports a Zacks Rank #1 (Strong Buy) at present, and NiSource Inc. NI and Ameren Corporation AEE, both holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

VST’s long-term (three to five years) earnings growth rate is 17.4%. The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) is pinned at $4.96, indicating year-over-year growth of 38.2%.

NiSource’s long-term earnings growth rate is 6.95%. The Zacks Consensus Estimate for the company’s 2024 EPS is pegged at $1.73, indicating a year-over-year improvement of 8.1%.

AEE’s long-term earnings growth rate is 6.59%. The Zacks Consensus Estimate for the company’s 2024 EPS is pinned at $4.61, indicating a year-over-year increase of 5.3%.

 

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