A month has gone by since the last earnings report for FirstEnergy Corporation FE. Shares have added about 2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
FirstEnergy Misses Q4 Earnings, Issues 2017 Guidance
FirstEnergy Corporation announced fourth-quarter 2016 operating earnings of $0.38 per share, missing the Zacks Consensus Estimate of $0.39 by 2.6%.Quarterly earnings were down 34.5% year over year.
On a GAAP basis, FirstEnergy reported a loss of $13.44 per share, much wider than the prior-year loss of $0.53.
The variance between GAAP and operating earnings figure was due to actuarial assumptions of $0.21, other charges of $0.03, regulatory charges of $0.01, merger accounting related costs of a penny, asset impairment charges of $13.54, debt redemption costs of $0.01 and trust securities impairment cost of $0.01.
Full-year 2016 operating earnings came in at $2.64, missing the Zacks Consensus Estimate of $2.66 by 1.1%. Yearly earnings fell 3% year over year.
Full-year GAAP loss stood at $14.49 per share, compared to earnings of $1.37 in 2015.
FirstEnergy generated total revenue of $3,375 million in the fourth quarter of 2016, missing the Zacks Consensus Estimate of $3,533 million by 4.5%. Reported revenues were also down 4.7% from $3,541 million reported a year ago.The top line declined due to lower revenues from Competitive Energy Services.
Full-year 2016 revenues came in at $14,562 million, missing the Zacks Consensus Estimate of $15,030 million by 3.1%. Yearly revenues fell 3.1% year over year.
Highlights of the Release
Total electric sales increased by 1,501 thousand megawatt-hours (MWh), or 4.4% year over year. Residential sales were up by 950 thousand MWh (8.1%), while commercial sales grew 341 thousand MWh (3.4%). Industrial sales improved by 215 thousand MWh (1.8%) primarily on account of higher usage in the shale, gas and coal sectors.
For the fourth quarter, FirstEnergy incurred operating expenses of $3,081 million, down 6.3% from $3,289 million a year ago primarily due to lower fuel and purchased power.
Operating income in the reported quarter stood at $294 million, up from $252 million in the prior-year quarter.
FirstEnergy's cash on hand as of Dec 31, 2016 was $199 million, up from $131 million as of Dec 31, 2015.
Cash from operating activities in the fourth quarter was $791 million, compared with $1,130 million a year ago.
Long-term debt and other long-term obligations as of Dec 31, 2016 were $18,192 million, compared with $19,099 million as of Dec 31, 2015.
FirstEnergy has provided its operating earnings guidance for first quarter 2017 and full year in the range of $0.65–$0.75 and $2.70–$3.00, respectively.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted lower by 10.3% due to these changes.
FirstEnergy Corporation Price and Consensus
FirstEnergy Corporation Price and Consensus | FirstEnergy Corporation Quote
At this time, FirstEnergy's stock has an average Growth Score of 'C', however its Momentum is lagging a lot with a 'F'. The stock was allocated also a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value than growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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