On Thursday, Scotiabank (TSX:BNS) analyst Andrew Weisel upgraded shares of FirstEnergy Corp. (NYSE:NYSE:FE), a $23.12 billion utility company, from Sector Perform to Sector Outperform, raising the price target to $50.00 from $45.00.
The upgrade reflects a positive outlook on the company's recovery and progress following a past bribery scandal. Weisel emphasized the company's proactive steps to improve its operations and the advancements made on the regulatory front over the past year. According to InvestingPro data, the stock's low beta of 0.5 suggests relatively stable price movements compared to the market.
FirstEnergy's stock has been trading at a 20% P/E discount, which the analyst believes is unwarranted. With a PEG ratio of 0.38 and a 27-year track record of consistent dividend payments, as reported by InvestingPro, the company shows strong fundamentals. Weisel noted that despite the complexity of the Ohio (OH) utility story and its less than 20% contribution to overall earnings, the risks are adequately reflected in the current stock price. The firm's position is that a neutral outcome in Ohio, rather than a significant win, is sufficient for the stock's success.
The analyst also pointed out FirstEnergy's potential to benefit from increased data center activity and is anticipating capital expenditure and load growth updates in early 2025. While the company's revenue grew by 4.3% in the last twelve months, InvestingPro analysis reveals 10 additional key insights about the company's growth potential and financial health. The underperformance of FirstEnergy's shares over the past three months was cited as an attractive entry point for investors seeking value, with technical indicators suggesting the stock may be oversold.
The revised price target of $50 represents a 28% upside and is based on a narrowed discount to the sector anchor multiple, now applying a 5% discount to a 16x multiple on the firm's 2027 earnings per share estimate. This adjustment from a 7.5% discount reflects a sector-wide roll-forward in valuation metrics. The analyst's statement underscores the firm's confidence in FirstEnergy's stability and future growth potential.
In other recent news, FirstEnergy Corp has reported a slight dip in GAAP earnings per share in its Third Quarter 2024 Earnings Conference Call, compared to the same quarter in 2023. The operating earnings guidance for the year has been narrowed, despite challenges such as higher storm-related expenses and the impact of a 30% sale of FirstEnergy Transmission. The company's capital investment plan for 2024 has been increased by 24%, focusing on enhancing grid reliability and customer experience. A joint development agreement for regional transmission projects has been entered, potentially bringing in a $3.8 billion investment.
Fitch has upgraded FirstEnergy's issuer and unsecured credit ratings, indicating an improved financial position. These are recent developments that reflect the company's commitment to its long-term growth and operational excellence. KeyBanc has maintained its focus on FirstEnergy as an attractive investment within the utility sector, despite lowering the price target slightly. On the other hand, Seaport Global Securities has downgraded FirstEnergy's stock rating from Buy to Neutral due to regulatory risks in Ohio.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.