FirstEnergy Corporation (FE) is making waves in the Utility sector with its continuous capital investments focused on maintaining and increasing resilience. These strategic moves are strengthening its infrastructure, paving the way for enhanced performance and solidifying its position as a solid investment option. Let’s delve into the factors driving FE’s appeal:
Growth Projections and Surprise History:
FirstEnergy’s growth prospects are promising. The Zacks Consensus Estimate for 2024 earnings per share is $2.70, representing a year-over-year growth of 5.5%. Similarly, the consensus estimate for 2024 sales is pegged at $13.78 billion, signifying a year-over-year growth of 7.1%. Furthermore, the company’s long-term (three to five years) earnings growth rate stands at 7%. FE’s positive earnings surprise history further reinforces its strong financial performance. Its trailing four-quarter earnings surprise averages 2.66%, indicating consistent outperformance.
Generous Dividend Yield:
FirstEnergy has a reputation for rewarding its shareholders with regular dividend payments. In February 2023, the company’s board of directors approved a new dividend policy, increasing the target payout ratio to 60-70% from the previous 55-65%. This translates to a current dividend yield of 3.86%, considerably higher than the Zacks S&P 500 composite’s average yield of 1.24%.
Strong Return on Equity:
FirstEnergy’s current return on equity (ROE) is 12.12%, surpassing the industry average of 10.42%. This key profitability measure reflects FE’s effectiveness in utilizing shareholder funds to generate income, showcasing a strong track record of operational efficiency.
Robust Solvency:
FirstEnergy’s solvency position is robust, indicated by a time-to-interest earned ratio of 2.11 at the end of the second quarter. A ratio greater than one signals the company’s ability to comfortably meet future interest obligations, ensuring financial stability.
Strategic Investments for Enhanced Service:
FirstEnergy’s strategic investments are focused on serving its 6 million customers more efficiently. The company’s “Energize365” program, a multi-year grid evolution platform, is dedicated to enhancing the customer experience while maintaining affordability. With planned investments of $26 billion between 2024 and 2028, FE aims to install advanced equipment and technologies to strengthen and modernize its transmission and distribution infrastructure. This includes upgrading transmission and renewable generation assets to ensure reliable electricity transmission, even during adverse weather conditions.
Strong Price Performance:
FE’s stock has demonstrated impressive price performance, gaining 23.4% year-to-date, outperforming the industry’s 22.7% growth.
Other Promising Stocks:
Aside from FirstEnergy, several other top-ranked stocks in the industry offer attractive investment opportunities. These include NiSource Inc. (NI), IDACORP, Inc. (IDA), and Edison International (EIX), each carrying a Zacks Rank of 2. NiSource boasts an average earnings surprise of 20.64% over the last four quarters, while IDACORP and Edison International delivered average earnings surprises of 10.35% and 4.13%, respectively, over the same period. These companies also exhibit strong sales growth projections, further solidifying their potential as promising investments.
