Results: FirstEnergy Corp. Exceeded Expectations And The Consensus Has Updated Its Estimates

Results: FirstEnergy Corp. Exceeded Expectations And The Consensus Has Updated Its Estimates

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="There's been a major selloff in FirstEnergy Corp. (NYSE:FE) shares in the week since it released its second-quarter report, with the stock down 30% to US$29.48. FirstEnergy reported US$2.5b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.57 beat expectations, being 6.9% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.” data-reactid=”28″>There’s been a major selloff in FirstEnergy Corp. (NYSE:FE) shares in the week since it released its second-quarter report, with the stock down 30% to US$29.48. FirstEnergy reported US$2.5b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.57 beat expectations, being 6.9% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" View our latest analysis for FirstEnergy ” data-reactid=”29″> View our latest analysis for FirstEnergy

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Taking into account the latest results, the most recent consensus for FirstEnergy from twelve analysts is for revenues of US$11.3b in 2020 which, if met, would be a reasonable 6.0% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 130% to US$2.32. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$11.3b and earnings per share (EPS) of US$2.28 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.

The consensus price target fell 12% to US$42.03, suggesting that the analysts might have been a bit enthusiastic in their previous valuation – or they were expecting the company to provide stronger guidance in the quarterly results. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic FirstEnergy analyst has a price target of US$54.00 per share, while the most pessimistic values it at US$36.00. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that FirstEnergy is forecast to grow faster in the future than it has in the past, with revenues expected to grow 6.0%. If achieved, this would be a much better result than the 7.3% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 3.2% per year. So it looks like FirstEnergy is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates – from multiple FirstEnergy analysts – going out to 2024, and you can see them free on our platform here.” data-reactid=”51″>With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple FirstEnergy analysts – going out to 2024, and you can see them free on our platform here.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Even so, be aware that FirstEnergy is showing 5 warning signs in our investment analysis , and 1 of those doesn’t sit too well with us…” data-reactid=”56″>Even so, be aware that FirstEnergy is showing 5 warning signs in our investment analysis , and 1 of those doesn’t sit too well with us…

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.” data-reactid=”57″>This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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