What happened
Shares of FirstEnergy (FE +1.41%) rallied more than 10% by 2:30 p.m. EST on Thursday. Powering the utility stock's surge was its fourth-quarter results, 2021 outlook, and the revelation that Carl Icahn might be buying a stake in the company.
So what
FirstEnergy reported rather lackluster Q4 results. It only generated $0.32 per share of operating earnings, which missed the analysts' consensus estimate by $0.16 per share. As a result, the company's full-year results came in at $2.39 per share, below 2019's level of $2.58 per share. The primary issue weighing on the company's earnings was the proactive steps it took to resolve the regulatory issues facing its Ohio utilities following last year's bribery scandal, which cost it $0.15 per share in Q4. On top of that, lower weather-related energy usage and higher costs also impacted its Q4 results.
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The utility anticipates better days ahead in 2021. It expects to generate between $2.40 to $2.60 per share of operating earnings. Powering that rebound will be the company's progress on its strategic goals and the absence of the additional costs associated with the issues facing its Ohio utilities.
FirstEnergy also unveiled that activist investor Carl Icahn is looking to acquire a stake in the company. In its annual report, the utility noted that it received a letter earlier this week that Icahn filed a request with the Federal Trade Commission and Department of Justice asking to acquire $184 million to $919.9 million of the utility's voting shares. The company doesn't know if Icahn acquired those shares or the intentions behind the request to purchase the utility's stock.
Now what
FirstEnergy has been under a lot of pressure over the past year because of its issues in Ohio, sluggish growth, carbon-emissions profile, and weak balance sheet. Because of that, the market sees upside potential if an activist investor like Carl Icahn does acquire a sizable stake in the company and pushes for change. That makes his potential involvement worth noting as he could get the company on the path to creating shareholder value.
