FirstEnergy Corporation’s FE growing regulated base and distribution and transmission lines are expected to boost its earnings. The company’s ongoing investment is also projected to increase grid reliability and enable efficient customer service. The Energizing the Future initiative will likely add to its overall operational strength.
However, this Zacks Rank #3 (Hold) stock has to face risks related to ongoing increases in interest rates and any delay in completing a capital project.
The utility’s efforts to expand its regulated generation mix increased earnings predictability. In the last few years, FirstEnergy witnessed a successful broadening of regulated operations and a complete transition to a fully-regulated utility company.
FirstEnergy plans to invest nearly $11.4 billion in the 2023-2025 period to further strengthen its existing operations. The company expects to invest $5.9 billion in regulated distribution and $5.4 billion in regulated transmission during the same time frame. Strengthening of the transmission and renewable generation assets will allow FE to provide emission-free electricity to customers and transmit electricity even under adverse weather conditions.
The increase in interest rates will raise the entire project cost (compared with the previous projection), resulting in a decline in profitability. Any delay in the timely completion of the capital projects is a headwind.
Stocks to Consider
Some better-ranked stocks from the same industry are Southern Company SO, Consolidated Edison ED and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Southern Company’s long-term (three to five years) earnings growth rate is 4%. The Zacks Consensus Estimate for SO’s 2023 earnings per share (EPS) indicates an increase of 0.3% from the previous year’s recorded number.
Consolidated Edison’s long-term earnings growth rate is 2%. The Zacks Consensus Estimate for ED’s 2023 EPS indicates an improvement of 6.81% from that registered in 2022.
NiSource’s long-term earnings growth rate is 6.9%. The Zacks Consensus Estimate for 2023 EPS is pegged at $1.57, implying year-over-year growth of 6.8%.
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