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On Tuesday, Jefferies analyst Julien Dumoulin-Smith adjusted the price target for FirstEnergy Corp. (NYSE:FE) shares, reducing it to $39 from the previous $43, while reiterating a Hold rating on the stock. Currently trading at $40.42, with a market capitalization of $23.3 billion and a notable 4.4% dividend yield, FirstEnergy has maintained dividend payments for 28 consecutive years. The revised target reflects a more conservative growth outlook for the company compared to the consensus estimate. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.
Dumoulin-Smith noted that FirstEnergy is anticipated to grow at a rate of 7.0% through 2029, slightly below the consensus estimate of 7.4%. This projection is set against the backdrop of near-term challenges, particularly in Ohio. Despite these headwinds, the analyst expects that the company’s $28 billion capital investment plan will drive an 8.6% growth in rate base, which is just shy of the company’s own guidance of 9%. InvestingPro data reveals the company maintains a significant debt burden with a debt-to-equity ratio of 1.95, while its Financial Health Score stands at "Fair."
The analyst also pointed out regulatory concerns in Ohio, which he believes can be addressed. However, he underscored that there are ongoing risks until the 2024 rate case and Ohio legislation are fully resolved. The new target of approximately 14% for funds from operations to debt (FFO/D) is a slight downgrade from the previous goal of 14%-15%, indicating weaker credit metrics.
In his comments, Dumoulin-Smith stated, "We see FE growing at 7.0% through 2029 (vs. consensus at 7.4%), despite near-term headwinds, especially in Ohio. We forecast FE’s $28bn capital plan as driving 8.6% rate base growth, vs. guidance of 9%. OH regulatory concerns seem able to be overcome, although we highlight ongoing risks until both the 2024 rate case & OH legislation are fully resolved. New ~14% FFO/D goal vs. prior 14%-15% highlights weaker credit metrics. We maintain HOLD with a $39.00 PT and ~1% TSR."
The maintenance of the Hold rating alongside the lowered price target suggests that Jefferies sees limited upside for FirstEnergy stock in the near term, weighed down by regulatory uncertainties and a modest growth forecast. The new price target represents Jefferies’ valuation of the stock based on the outlined factors. The broader analyst consensus shows a moderate buy recommendation, with price targets ranging from $41 to $48. For deeper insights into FirstEnergy’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.
In other recent news, FirstEnergy Corp. has announced a series of significant developments affecting its operations and financial outlook. The company disclosed organizational changes, including a workforce reduction and employee reassignments, in an effort to align with its new business model and improve operational efficiency. Furthermore, FirstEnergy’s Board of Directors has declared an increased quarterly dividend of $0.445 per share, reflecting an anticipated annual rate of $1.78 per share for 2025. This marks the third dividend increase since September 2023, underscoring the company’s commitment to providing shareholder value.
In terms of financial assessments, Mizuho (NYSE:MFG) Securities has reduced FirstEnergy’s stock price target to $41, maintaining a Neutral stance, following a downward revision in the company’s earnings forecast. Guggenheim also adjusted its price target for FirstEnergy, lowering it to $45 while maintaining a Buy recommendation, noting that the company’s communication during the earnings report could have been better managed. On the infrastructure front, FirstEnergy Transmission LLC, a joint venture with Brookfield Super-Core Infrastructure Partners, has secured approximately $1.3 billion in grid projects from PJM Interconnection to enhance the electric grid and support regional economic growth.
These projects include the construction of 415 miles of transmission lines and substations across several states. The company emphasizes its commitment to reliability and operational excellence through these investments. Despite the ongoing challenges and legislative developments, FirstEnergy’s leadership remains confident in achieving its growth targets.
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