Why FirstEnergy (FE) Stock Is Up In Pre-Market Trading Wednesday

NEW YORK (TheStreet) -- Shares of FirstEnergy Corp. (FE) are up 2.17% to $33.36 in pre-market trading  on Wednesday after a ratings upgrade to "buy" from "hold" at Jefferies.

The firm upgraded its rating on the diversified energy company based on a valuation call.

On Tuesday the company reported basic earnings and revenue for the 2014 first quarter increased over the same period the previous year.

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Basic earnings were 50 cents per common share, on earnings of $208 million, compared to 47 cents, on earnings of $196 million from the 2013 first quarter.

Revenue for the 2014 first quarter was $4.2 billion versus $3.7 billion from the year ago quarter.

Separately, TheStreet Ratings team rates FIRSTENERGY CORP 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 strengths can be seen in multiple areas, such as its increase in net income, revenue growth and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 195.9% when compared to the same quarter one year prior, rising from -$148.00 million to $142.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 4.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FIRSTENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FIRSTENERGY CORP reported lower earnings of $0.90 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.61 versus $0.90).
  • Currently the debt-to-equity ratio of 1.63 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.19, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, FIRSTENERGY CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • You can view the full analysis from the report here: FE Ratings Report
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