NEW YORK (TheStreet) -- FirstEnergy (FE - Get Report) was falling 3.05% to $31.17 on Wednesday after the company announced it would cut its dividend by 35%.
The Akron, Ohio-based company, which owns electricity providers in six states, cut dividends for the first time as power prices continue to decline. Increasing competition in the sector has been driving down prices and profits.
FirstEnergy became the second major U.S. utility in nearly a year to make a dividend cut, as Chicago-based Exelon (EXC) also slashed its dividend for the first time by 41% in Feb. 2013.
TheStreet Ratings team rates FirstEnergy as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FIRSTENERGY CORP (FE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FE, with its decline in revenue, slightly underperformed the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FIRSTENERGY CORP's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIRSTENERGY CORP reported lower earnings of $1.81 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($2.99 versus $1.81).
- 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 48.7% when compared to the same quarter one year ago, falling from $425.00 million to $218.00 million.
- The gross profit margin for FIRSTENERGY CORP is currently lower than what is desirable, coming in at 28.54%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.42% trails that of the industry average.
- Net operating cash flow has declined marginally to $1,178.00 million or 2.96% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, FIRSTENERGY CORP has marginally lower results.
- You can view the full analysis from the report here: FE Ratings Report