FirstEnergy Corporation (FE Quick QuoteFE - Free Report) has been gaining from its transition to become a fully-regulated utility company and systematic investments to strengthen infrastructure. Efficient debt management and the ‘Energizing the Future’ plan to expand transmission capability are likely to drive performance over the long run.

FirstEnergy currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2022 earnings per share (EPS) of FirstEnergy has moved up 6.4% year over year. FE’s long-term (three to five years) earnings growth is currently pegged at 6.4%. Moreover, FirstEnergy’s current dividend yield of 3.7% is better than the industry average of 3.2%.You can see the complete list of today’s Zacks #1Rank (Strong Buy)stocks here.

Tailwinds

Strategic investments help FirstEnergy serve its six million customers more efficiently. In the past several years, the regulated distribution segment experienced rate base growth through systematic investments. FE expects to invest $17 billion in the 2021-2025 period, of which $8.6 billion will be directed toward grid modernization and increasing resiliency, $1.7 billion for conservation & $6.5 billion for clean energy transition and customer-centric growth projects. Strengthening transmission assets will allow the company to transmit electricity even during adverse weather conditions.

FirstEnergy’s long-term debt and other long-term obligations as of Mar 31, 2022 were $21,754 million, down 2.2% from $22,248 million on Dec 31, 2021. The total debt-to-capital ratio for the first quarter of 2022 is 72.6%, lower than 73.3% in the fourth quarter of 2021. The times interest earned (TIE) ratio at the end of the first quarter of 2022 was 2.3. TIE greater than one reflects the firm’s ability to meet debt obligations in the near future without any difficulties.

FirstEnergy is focused on lowering emission levels and has undertaken initiatives for the same. In November 2020, it updated the target to become 100% carbon neutral by 2050, with a mid-term goal of a 30% reduction in greenhouse gases within direct operational control by 2030 from the 2019 level. Also, it plans to electrify 30% of the vehicle fleet by 2030 and further 100% by 2050. FirstEnergy also implemented a corporate waste reduction and recycling initiative in its service territories.

Headwinds

Although FirstEnergy keeps investing in development opportunities to further strengthen its transmission operations, the timely completion of projects within budget might not be possible. The existing coal-fired generating plants, the breakdown or failure of equipment or processes due to the aging infrastructure and an adverse impact of severe weather conditions can lower demand for services, thereby impacting the operation and financial results. To meet the conditions of stringent rules and regulations and maintain cyber security, FirstEnergy needs to bear additional costs.

Price Performance

In the past year, shares of FE have rallied 13.3% compared with the industry’s 5.1% growth.

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Stocks to Consider

Some better-ranked stocks from the same industry are Ameren (AEE Quick QuoteAEE - Free Report) , Consolidated Edison (ED Quick QuoteED - Free Report) and MGE Energy (MGEE Quick QuoteMGEE - Free Report) , each currently carrying a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for 2022 EPS of Ameren, Consolidated Edison and MGE Energy has moved up 5.99%, 2.28% and 7.19%, respectively, year over year.

The long-term earnings growth of Ameren, Consolidated Edison and MGE Energy is projected at 7.2%, 2% and 6.1%, respectively.

In the past three months, AEE, ED and MGEE shares have surged 10.2%, 21.7% and 3.2%, respectively.