Diversified energy company FirstEnergy Corp. (FE) announced its second-quarter 2010 operating earnings of 82 cents per share, which surpassed the Zacks Consensus Estimate of 76 cents. The results of the company were lower than the year-ago earnings of 87 cents per share.
The GAAP earnings of the company during the quarter were 87 cents per share versus $1.36 per share reported in the second quarter of 2009.
The difference between the GAAP and operating earnings during the reported quarter was due to the impact of a few one-time items: a 2-cent impact of trust securities impairments, a 1-cent impact due to merger costs, a loss of 1 cent due to a litigation settlement and 7 cents for derivative mark-to-market adjustments.
Total Revenue
Total Revenue of FirstEnergy at the end of second-quarter 2010 was $3.1 billion versus $3.3 billion for the year-ago quarter. The results of the company are lower than the Zacks Consensus Estimate of $3.6 billion.
Operational Update
In the quarter, total electric generation sales of FirstEnergy increased 7%, with retail generation sales up 9% and wholesale sales down 8%, compared with the same period last year.
Total electric distribution deliveries increased by 8% compared with the second quarter of 2009 due to a 13% increase in use of electricity in the industrial sectors, mainly in steel and automotive sectors.
On the residential and commercial side, deliveries increased by 7% and 5%, respectively, in the quarter, primarily due to higher average temperatures this year across much of the company’s service area.
Net income of the company in the second quarter of 2010 was $256 million versus $408 million in the year-ago quarter. The second-quarter results benefited from a lower effective tax rate related to the resolution of formerly uncertain tax positions, which were offset by reduced transition cost recovery by Cleveland Electric Illuminating Co., and higher fuel and purchased power costs.
Dividend
On July 20, 2010, the board of directors of FirstEnergy announced a dividend of 55 cents per share. The dividend is payable on September 1, 2010, to shareholders of record on August 6, 2010.
Guidance
FirstEnergy raised the operating earnings guidance for 2010 to the range of $3.60─$3.70 per share from the previous range of $3.50─$3.70 per share. The company increased the low end of the guidance range by 10 cents to reflect the positive impact of improved sales and revenue during the second quarter along with a gradual improvement in the economy.
GAAP earnings guidance for 2010 is in the range from $3.29─$3.39 per share.
Our View
The company’s efforts to reduce costs, enhance efficiencies and win a larger share of the generation business in Ohio are indeed commendable.
We retain a short-term Zacks #3 Rank (Hold) and a long-term Neutral recommendation on the stock.
Based in Akron, Ohio, FirstEnergy involves in the generation, transmission and distribution of electricity, as well as energy management and other energy-related services.
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