BofA Upgrades FirstEnergy Stock On Steady Improvement In Ohio Regulatory Backdrop

The probability of a reduction in FirstEnergy Corp’s FE earnings of around $150 million due to the Ohio rate reset has fallen from the earlier 100% to 50%, according to BofA Securities.

The FirstEnergy Analyst: Julien Dumoulin-Smith upgraded the rating for FirstEnergy from Neutral to Buy, while raising the price target from $32 to $37.

The FirstEnergy Thesis: The company’s relationship with the Public Utility Commission of Ohio remains intact, Dumoulin-Smith said in the upgrade note.

Recent management commentary has been “constructive,” signaling “confidence in keeping earnings lag associated with filing a new Ohio rate case to ~10c, in what would represent a constructive outcome relative to our and broader market expectations,” he said,

“While we continue to see upwards of $0.30 in the fullest OH rate resets, we perceive management's position as calculated around this risk of resolution at this level and even confirming a case is pushed to '24 is all positive to building up the B/S and minimizing capital needs,” the analyst wrote.

FE Price Action: Shares of FirstEnergy had risen by 2.04% to $34.05 at the time of publication Tuesday.

(Photo: FirstEnergy)