FirstEnergy Corporation’s (FE - Free Report) widening regulated base and growing transmission lines are expected to boost its operational strength.
Earnings estimates for the company been revised upward in the past 60 days, reflecting analysts’ optimism in the stock. The Zacks Consensus Estimate for 2019 and 2020 earnings have inched up 0.4% and 0.8% to $2.50 and $2.46 per share, respectively.
Let’s take a look at the factors that are working in favor of this Zacks Rank #2 (Buy) utility company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Surprise Trend & Long-Term Growth
FirstEnergy has surpassed the Zacks Consensus Estimates for earnings in the trailing four quarters with an average of 4.24%. The company’s long-term (3-5 years) earnings growth rate is pegged at 6%.
Dividend Yield & Return on Equity (ROE)
The company is rewarding shareholders through dividend payment since 2011. Currently, the company has a dividend yield of 3.11% compared with the Zacks S&P 500 composite’s 1.89% and the industry’s 2.82%.
FirstEnergy has an ROE of 20.29%, higher than the industry’s average of 9.40% and Zacks S&P 500 composite’s 17.31%. This indicates the company’s efficiency in utilizing shareholders’ funds.
The company’s “Energizing the Future” modernization plan is aimed to upgrade and expand its regulated transmission capabilities. Through the plan, the company expects to bring 600-700 projects in service during the current year. This plan includes Regulated Transmission operation, wherein the company plans to invest $4.8 billion in capital from 2018 to 2021 and targets to invest $1.2 billion annually through 2021.
These investments are expected to generate Regulated Transmission rate base growth of nearly 11% through 2021. The company expects to recover more than 80% of these capital investments. The modernization drive will likely enable the company to serve its six million customers more efficiently.
In the past 12 months, FirstEnergy’s shares have rallied 31.1% compared with the industry’s growth of 16.5%.
Focus on Lowering Emissions
The company focuses on reducing emission levels and has undertaken initiatives for the same. As of December 2018, the company achieved 62% reduction in CO2 and expects to achieve 80% later in 2019. By 2045, it aims to reduce CO2 emissions from generating fleet by at least 90%, below 2005 levels.
Other Stocks to Consider
Some other top-ranked stocks in the utility sector are IDACORP Inc (IDA - Free Report) , NRG Energy, Inc (NRG - Free Report) and The AES Corporation (AES - Free Report) . NRG Energy sports a Zacks #1 (Strong Buy), while IDACORP and AES hold a Zacks #2 (Buy).
IDACORP, NRG Energy and AES delivered average positive earnings surprise of 7.79%, 11.64% and 4.85%, respectively, in the last four quarters.
Long-term earnings growth for IDACORP, NRG Energy and AES is pegged at 3.85%, 36.26% and 8.49%, respectively.
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