Rating Change #1
FirstEnergy Corp (FE) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 24.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- FIRSTENERGY CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, FIRSTENERGY CORP reported lower earnings of $2.13 versus $2.58 in the prior year. This year, the market expects an improvement in earnings ($3.43 versus $2.13).
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electric Utilities industry. The net income has significantly decreased by 47.0% when compared to the same quarter one year ago, falling from $185.00 million to $98.00 million.
- The debt-to-equity ratio of 1.31 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.26, which clearly demonstrates the inability to cover short-term cash needs.
FirstEnergy Corp. operates as a diversified energy company. The company, through its subsidiaries, engages in the generation, transmission, and distribution of electricity. The company has a P/E ratio of 21, equal to the average utilities industry P/E ratio and above the S&P 500 P/E ratio of 17.7. FirstEnergy has a market cap of $19.43 billion and is part of the utilities sector and utilities industry. Shares are up 5.5% year to date as of the close of trading on Friday.You can view the full FirstEnergy Ratings Report or get investment ideas from our investment research center. -- Reported by Kevin Baker in Jupiter, Fla.
For additional Investment Research check out our Ratings Research Center. For all other upgrades and downgrades made by TheStreet Ratings Model today check out our upgrades and downgrades list.
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