FirstEnergy: Making Good Progress While Putting Bribery Scandal Behind It
Summarize this article with:
Michael Fitzsimmons22.41K FollowersFollow5ShareSavePlay(9min)CommentsSummaryFirstEnergy is initiated at a BUY, as balance sheet improvements and a new CEO suggest the worst is behind the company.FE offers a 4.0% dividend yield, trades at a valuation discount to XLU, and targets 6-8% EPS CAGR with an estimated 5-6% dividend growth rate.AI data-center demand and increased capital deployment are driving a robust growth outlook, with 2025 revenue expected to rise 5-5.5%.Regulatory risks in Ohio remain, but already low TTM ROE in Ohio suggests limited further downside; debt reduction enhances financial flexibility. imaginima/iStock via Getty Images Five years ago, shareholders in utility company FirstEnergy (FE) were rocked by a rogue CEO swept up in a bribery scandal in the state of Ohio that resulted in an order to pay $250This article was written byMichael Fitzsimmons22.41K FollowersFollowMichael Fitzsimmons is a retired electronics engineer and avid investor. He advises investors to construct a well-diversified portfolio built on a core foundation of a high-quality low-cost S&P500 fund. For investors who can tolerate short-term risks, he advises an over-weight position in the technology sector, which he believes is still in the early stages of a long-term secular bull-market. For dividend income, and as a 4th generation oil & gas man, Fitzsimmons suggests investors consider a position in large O&G companies that provide strong dividend income and dividend growth. Fitzsimmons' articles on portfolio management recommend a top-down capital allocation approach that is aligned with each individual investor's personal situation (i.e. age, retired/working, risk tolerance, income, net worth, goals, etc) and might include allocations into investment categories such as the S&P500, technology, dividend income, sector ETFs, growth, speculative growth, gold, and cash.Analyst’s Disclosure:I/we have a beneficial long position in the shares of XLU either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I am an electronics engineer, not a CFA. The information and data presented in this article were obtained from company documents and/or sources believed to be reliable, but have not been independently verified. Therefore, the author cannot guarantee their accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for the investment decisions you make.Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsWhat drives the BUY rating for FirstEnergy (FE) now?FE's improved balance sheet, new leadership, attractive 4.0% yield, and exposure to AI data-center demand support a BUY rating, overcoming past scandal concerns.How is FE positioned for growth versus peers in the utility sector?FE trades at a 19.2x P/E versus XLU's 21.0x, offers a higher yield, and expects 6-8% EPS CAGR, with AI-driven demand and capital investment fueling growth.What are the key risks to FE’s forward outlook?Regulatory headwinds in Ohio and potential volatility in AI data-center demand pose risks, but current low ROE and reduced debt limit further downside.Recommended For You