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FirstEnergy's (FE) Modernization Drive to Enhance Services

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FirstEnergy Corporation’s FE expanding regulated base and growing transmission lines are expected to boost earnings. The Energizing the Future initiative will add to the company’s overall operational strength.

For 2020, earnings estimates inched up 0.4% to $2.49 per share in the past 30 days. Additionally, FirstEnergy has trailing four-quarter positive earnings surprise of 5.47%, on average.

In the past 12 months, shares of the company have returned 3.4% against the industry’s decline of 0.8%.

What’s Driving the Stock?

FirstEnergy’s efforts to expand its regulated generation mix have supported its earnings. In the past few years, the company expanded its regulated operations and transitioned into a fully-regulated utility company.

The company affirmed its long-term compound annual operating earnings growth projection in the range of 6-8% from 2018 through 2021 and extended it to 5-7% through 2023. This projection includes plans to issue equity, up to a total of $600 million annually in 2022 and 2023 to fund its long-term growth projects. This strategic investment will enable the company to serve its six-million customers more efficiently.
FirstEnergy’s modernization drive will boost its service reliability and lead to customer retention. The company expects to complete approximately $170 million of Grid Modernization work this year. This includes deploying 250,000 smart meters for Ohio customers. Moreover, the Energizing the Future plan is aimed at upgrading and expanding its regulated transmission capabilities. The company plans to invest more than $7 billion in capital from 2018 to 2023 under Energizing the Future.

The company is focused on lowering emission levels and has undertaken initiatives for the same. In 2015, FirstEnergy set a goal of reducing CO2 emissions by at least 90% below 2005 levels by 2045. As of December 31, 2018, FirstEnergy has reduced its CO2 emissions by approximately 62%.

However, the risk of unplanned outages in facilities, regulations and unexpected delay in completion of the ongoing capital project might put pressure on the bottom line.

Zacks Rank

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Few better-ranked stocks from the same industry are Pacific Gas & Electric Co. PCG, PNM Resources, Inc. PNM and Duke Energy Corporation DUK. All the three stocks hold a Zacks Rank #2 (Buy).

Long-term earnings growth of Pacific Gas & Electric, PNM Resources and Duke Energy is pegged at 2.50%, 6% and 4.70%, respectively.

Pacific Gas & Electric, PNM Resources and Duke Energy have trailing four-quarter positive earnings surprise of 7.35%, 10.79% and 6.53%, on average, respectively.

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