Please ensure Javascript is enabled for purposes of website accessibility

Why FirstEnergy Stock Is Surging Today

By Matthew DiLallo - Updated Feb 18, 2021 at 3:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The utility had some interesting updates.

What happened

Shares of FirstEnergy (FE 0.71%) 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. 

A nuclear power plant with four cooling towers beside a body of water.

Image source: Getty Images.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

FirstEnergy Corp. Stock Quote
FirstEnergy Corp.
FE
$42.51 (0.71%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.