FirstEnergy's Earnings Miss: A Blip or a Trend?

FirstEnergy Corp (FE, Financial) missed earnings per share (EPS) estimates by a significant 27% in the third quarter of 2024, raising concerns among investors and analysts alike. The company reported GAAP earnings from continuing operations of $0.73 per share, falling short of the analyst estimate of $0.89 per share. This earnings miss has led analysts to revise their forecasts, with some expressing skepticism about the company's long-term growth prospects.



FirstEnergy's revenue for the quarter was $3.7 billion, also below the estimated $3,906.90 million. Operating (non-GAAP) earnings were $0.85 per share, within the company's guidance range but lower than the $0.88 per share reported in the same quarter last year. These results have contributed to the revision of analysts' earnings forecasts.

The company faced several challenges in the third quarter, including lower customer demand due to mild weather, reduced distribution revenues in Ohio following the Electric Security Plan V order, and significantly higher storm restoration costs. These factors led to a narrowing of the full-year 2024 operating earnings guidance to $2.61 to $2.71 per share, down from the original range of $2.61 to $2.81 per share.

Despite these challenges, FirstEnergy increased its 2024 capital investment plan by $300 million to $4.6 billion, marking a 24% increase over 2023 levels. This investment is part of the company's Energize365 capital investment program, which aims for a 6-8% long-term annual operating earnings growth rate.

FirstEnergy's earnings miss has raised questions about the company's ability to meet expectations and maintain its competitive position in the Utilities - Regulated industry. However, it is essential to consider the temporary nature of the factors contributing to the earnings miss and the company's strategic focus on regulated investments and capital growth.

FirstEnergy's commitment to increasing capital investment, as demonstrated by the Energize365 program, positions the company well for future growth. By enhancing grid reliability and expanding its capital investment program, FirstEnergy can maintain and enhance the infrastructure necessary for reliable electric service, ultimately improving its earnings performance.

In conclusion, FirstEnergy Corp's earnings miss in the third quarter of 2024 has led analysts to revise their forecasts and raised concerns about the company's long-term growth prospects. However, the company's strategic focus on regulated investments and capital growth, coupled with the temporary nature of the factors contributing to the earnings miss, suggests that this may be a blip rather than a trend. As FirstEnergy continues to execute its Energize365 program and adapt to evolving market conditions, its ability to manage costs and optimize its investment portfolio will be key to achieving its long-term growth objectives.