Monday - Mizuho has increased the price target for FirstEnergy Corp. (NYSE:FE) shares to $41 from $38, while maintaining a Neutral rating on the stock.
The adjustment follows FirstEnergy's recent filing of its anticipated Ohio distribution rate case. The company is seeking a modest rate increase of approximately 1.6% across its three Ohio utilities. This rate filing is based on a $4.3 billion rate base and requests a return on equity (ROE) of 10.8% with a 55% equity ratio.
The current rates for FirstEnergy's Ohio utilities have been unchanged since 2008, with the previous terms set on a 49% equity ratio and a 10.5% ROE.
The new rate case represents a slight adjustment in these figures, which Mizuho believes warrants the updated price target. The firm's analyst cites market multiples as the basis for the new price target of $41.
FirstEnergy's rate case filing is significant as it marks the first update in over a decade and a half for the rates of its Ohio utilities. The proposed increase is relatively small, signaling a cautious approach to changing the financial structure under which these utilities operate.
The requested 10.8% ROE is a slight step up from the previous 10.5%, and the equity ratio has also been increased from 49% to 55%, indicating a stronger capital structure.
The rate increase, if approved, is expected to provide additional revenue to FirstEnergy, aligning the company's rates with the current market conditions.
Mizuho's stance on the stock remains neutral, suggesting that the firm sees the company as appropriately valued at the current levels, even with the proposed changes in the rate structure.
Investors and stakeholders in FirstEnergy will be watching closely as the Ohio distribution rate case progresses, to understand the potential impacts on the company's financials and stock performance.
The updated price target of $41 by Mizuho reflects the latest developments and provides a new benchmark for market expectations surrounding FirstEnergy shares.
InvestingPro Insights
In light of Mizuho's updated price target for FirstEnergy Corp. (NYSE:FE), recent data from InvestingPro offers additional context for investors considering the utility company's financials and stock performance. FirstEnergy's market capitalization stands at $23.17 billion, with a P/E ratio of 21.64, which adjusts to 20.83 when looking at the last twelve months as of Q1 2024. This valuation suggests that the stock is trading at a low P/E ratio relative to near-term earnings growth, an InvestingPro Tip that may interest value-focused investors.
Furthermore, FirstEnergy's dividend yield as of mid-May 2024 is 4.22%, a noteworthy figure for income investors, especially considering the company's track record of maintaining dividend payments for 27 consecutive years. This stability is complemented by a low price volatility, another InvestingPro Tip, which could appeal to investors seeking steady returns in uncertain markets.
For those interested in a deeper dive into FirstEnergy's financial performance and stock analysis, additional InvestingPro Tips are available, providing a comprehensive view of the company's prospects. To explore these further, investors can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering valuable insights to inform their investment decisions.
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