Hold Rating Maintained for FirstEnergy Amid Regulatory and Financial Uncertainty

Bank of America Securities analyst Ross Fowler maintained a Hold rating on FirstEnergy (FE – Research Report) yesterday and set a price target of $45.00.

Ross Fowler has given his Hold rating due to a combination of factors surrounding FirstEnergy’s regulatory environment and financial outlook. The Public Utilities Commission of Ohio (PUCO) staff has shown openness to lifting the base rate freeze, which could lead to the implementation of new base rates. However, this is contingent on negotiations regarding the Distribution Capital Rider (DCR) revenue cap, which could impact FirstEnergy’s financial strategy and capital allocation.
Additionally, while there is some support for including storm cost amortization in base rates, the overall regulatory environment remains uncertain, particularly with ongoing legislative developments and the potential for settlement negotiations. The company’s return on equity (ROE) considerations and the broader implications of the Electric Security Plan (ESP) framework also contribute to the cautious outlook. These elements, combined with the current market price being close to the price objective, justify maintaining a Hold rating for FirstEnergy’s stock.

Fowler covers the Utilities sector, focusing on stocks such as American Electric Power, Northwestern, and Sempra Energy. According to TipRanks, Fowler has an average return of 2.7% and a 60.59% success rate on recommended stocks.

In another report released on April 28, Mizuho Securities also maintained a Hold rating on the stock with a $43.00 price target.