FirstEnergy (NYSE:FE) -1% in Monday’s trading as Bank of America downgraded shares to Underperformed from Market Perform with a $38 price target, trimmed from $41, saying the stock should trade at a discount to peers given the average growth profile and above average regulatory uncertainty despite successes since the Ohio deferred prosecution agreement.
“Rate relief filings will come fast and furious in 2023 with Maryland, New Jersey, Ohio ESP, Pennsylvania consolidation and West Virginia followed by the pivotal Ohio rate case application in 2024 and potentially a full Pennsylvania rate case in 2024,” BofA’s Julien Dumoulin-Smith wrote.
FirstEnergy’s (FE) pension accounting exposes investors to more volatility than peers, according to the analyst.
The combined pressures prompted Dumoulin-Smith to cut his forecasts for 2022-25 earnings compound annual growth rate to 3% and 2023-25 EPS CAGR to 5.3%, below guidance of 6%-8% for 2022-25 and 7.6% for 2023-25.
Dumoulin-Smith said the downgrade is not driven by the 2024 Ohio rate case filing or other near-term Ohio considerations, but he still sees an elevated risk profile.
FirstEnergy (FE) shares show “bearish technical trends with an unattractive valuation,” Mike Zaccardi wrote in an analysis published recently on Seeking Alpha.