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Why Did FirstEnergy’s 4Q15 Earnings Slide?

Vincent Kruger

What Rained on FirstEnergy’s 4Q15 Earnings? (Hint:The Weather)

FirstEnergy’s 4Q15 earnings drag

FirstEnergy Corporation (FE) reported its fourth quarter results on February 16, 2015. FirstEnergy’s operating earnings for 4Q15 fell to $0.58 per share from $0.80 per share in 4Q14. Earnings from its regulated distribution business decreased during the quarter due to unfavorable weather conditions compared to the same quarter one year previously.

FirstEnergy’s full-year operating earnings for 2015 stood at $2.71 per share compared to $2.56 per share in 2014. Management of FirstEnergy provided earnings guidance for 1Q16 in the range $0.75–$0.85 per share.

Earnings highlights

Operating earnings from FirstEnergy’s regulated distribution segment decreased in 4Q15 mainly due to lower distribution deliveries and higher operating expenses compared to 4Q14. Residential sales decreased by 10.6% and commercial sales declined 3.4% due to mild temperatures in 4Q15. Energy efficiency programs also impacted sales negatively.

Earnings from FirstEnergy’s regulated transmission segment improved due to higher revenues, however, mainly due to the recovery of incremental expenses and a higher rate base at American Transmission, the transmission affiliate of FirstEnergy.

Meanwhile, the company’s operating earnings from its competitive business segment improved in 4Q15 due to higher margins, and its earnings increased by $0.05 per share during 4Q15 due to higher capacity revenues and increased wholesale sales.

Peer performance

Ohio is the key operating region for FirstEnergy. Along with FE, utilities (JXI)(VPU) like Duke Energy (DUK) and American Electric Power (AEP) have a significant presence in this market. Duke Energy is set to report its 4Q15 earnings on February 18, while American Electric Power already reported in early February. AEP’s earnings also suffered due to milder weather during the fourth quarter of 2015.

Continue to the next part for a look at FirstEnergy’s current valuation multiple.

Continue to Next Part

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