FE - Embedded Expectations Analysis - 2021 08 12
FirstEnergy Corp. (FE:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 28.6x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about persisting impacts from their Ohio bribery scandal, their compliance initiatives, and debt refinancing plans.Specifically, management may lack confidence in their ability to implement their comprehensive compliance initiatives, remain fully compliant with all the requirements of the DPA, and collaboratively resolve legal issues in Ohio. Furthermore, they may have concerns about the further impact of their Ohio-related lost distribution revenues, the potential of their smart grid programs, and the sustainability of higher weather-adjusted demand among residential customers. Moreover, management may lack confidence in their ability to build-out infrastructure for emerging distribution technologies and refinance their FE Corp. and FET credit facility borrowings. In addition, they may have concerns about inflationary headwinds.
FirstEnergy is a public utility holding company. The company and its subsidiaries are principally involved in the transmission, distribution and generation of electricity. The company's reportable operating segments are comprised of: Regulated Distribution, which distributes electricity through the company's utility operating companies and also controls regulated electric generation capacity located primarily in West Virginia, Virginia and New Jersey; and Regulated Transmission, which provides transmission infrastructure owned and operated by the transmission companies and certain of the company's utilities to transmit electricity from generation sources to distribution facilities.
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