UPDATE: BofA Securities Downgrades FirstEnergy Corp. (FE) to Neutral
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Rating Summary:
13 Buy, 13 Hold, 1 Sell
Rating Trend: Up
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
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BofA Securities analyst Julien Dumoulin-Smith downgraded FirstEnergy Corp. (NYSE: FE) from Buy to Neutral with a price target of $44.00 (from $52.00).
The analyst comments "We downgrade FirstEnergy (FE) to Neutral due to our growing concerns about the negative pension mark-to-market where we estimate ~$0.20 negative impact on 2023+, prior to mitigation, double management’s guidance. As a result, we reduce our EPS CAGR to the low-end of the 6-8% EPS CAGR. FE guided to a $0.10 potential pension headwind as of 3/31/22 while emphasizing that it was a preliminary estimate with mitigation opportunities from O&M reductions/timing. The situation has markedly deteriorated due to the broad decline in equities (~17%) and credit (~15%) YTD. As of mid-May, we now estimate that FE’s pension assets have declined -9%, down from -5.8% since 3/31. We give management full credit for the $0.10 cost mitigation guided to driving a net -$0.10 impact. Since FE’s earnings call on April 22, investor focus has been on the pension headwind from a range of holders. With the backdrop of volatile equity, credit, and treasury markets, we think FE is unlikely to outperform lower risk peers given this underappreciated headwind. A 1% change in pension fund performance equals $0.01 EPS."
For an analyst ratings summary and ratings history on FirstEnergy Corp. click here. For more ratings news on FirstEnergy Corp. click here.
Shares of FirstEnergy Corp. closed at $42.51 yesterday.
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