FirstEnergy Turns To Profit In Q4, Beats View; Affirms 2014 Outlook

(RTTNews) - FirstEnergy Corp. (FE) on Tuesday reported a turnaround to profit in the fourth quarter on higher revenues that were driven by colder temperatures. Adjusted earnings per share for the quarter beat analysts' estimates, while revenues missed their expectations.

Looking ahead, the utility company forecast earnings for the first quarter below Street estimates, but affirmed its earnings outlook for fiscal 2014.

Anthony Alexander, President and CEO of FirstEnergy said, Our solid results for the fourth quarter and the full year of 2013 are at the upper end of our guidance. We also took a series of decisive actions during 2013 that were intended to strengthen our financial position and reposition the company to focus on more predictable and stable growth initiatives in our regulated businesses."

The Akron, Ohio-based company's net income for the fourth quarter was $142 million or $0.34 per share, compared to net loss of $148 million or $0.35 per share in the prior-year quarter.

Excluding items, operating earnings for the quarter were $316 million or $0.75 per share, compared to $334 million or $0.80 per share in the year-ago quarter. On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.69 per share for the quarter. Analysts' estimates typically exclude special items.

The company noted that adjusted results for the latest quarter benefited from higher distribution revenues, higher regulated generation operating margin - primarily related to the Harrison Plant asset transfer in the latest quarter - and increased investment income as well as lower interest expense compared to the prior-year period.

However, results were negatively impacted by lower commodity margin at the competitive energy services segment as well as higher operating expenses.

Total revenues for the quarter rose 4 percent to $3.65 billion from $3.49 billion in the same quarter last year, but missed analysts' consensus estimate of $4.28 billion.

Total electric distribution deliveries for the quarter rose 4.1 percent from last year, largely due to colder temperatures. This drove a 3 percent increase in sales to both residential and commercial customers. Sales to industrial customers increased by 6.4 percent from the prior-year period.

Contract sales at the company's competitive segment grew 9 percent. Capacity revenues were higher, but overall commodity margin decreased due to higher expenses and lower average contract sales prices.

Total expenses for the quarter declined to $3.25 billion from $3.53 billion in the year-ago quarter.

For fiscal 2013, FirstEnergy's net income was $392 million or $0.94 per share, down from $770 million or $1.84 per share in the previous year. Operating earnings for the year were $3.04 per share, compared to $3.34 per share last year.

Total revenues for the year declined 2 percent to $14.92 billion from $15.27 billion in the prior year.

Street expected the company to earn $2.98 per share for the year on revenues of $15.28 billion.

Looking ahead to the first quarter, FirstEnergy forecast operating earnings in a range of $0.35 to $0.45 per share and reported earnings per share of $0.50 to $0.60 per share. Analysts expect the company to report first-quarter earnings of $0.63 per share.

For fiscal 2014, FirstEnergy affirmed its operating earnings outlook in a range of $2.45 to $2.85 per share and reported earnings per share of $2.38 to $2.82. Analysts expect the company to report earnings of $2.70 per share for the year.

On February 12, FirstEnergy completed the sale of eleven hydroelectric power stations in Pennsylvania, Virginia, and West Virginia to subsidiaries of Harbor Hydro Holdings, LLC, a subsidiary of LS Power Equity Partners II, LP, for about $395 million. The company expects to recognize a pre-tax gain of about $145 million.

In a separate statement, FirstEnergy said it has selected power management company Eaton Corp plc (ETN) for a conversion project at its Ohio power plant to enhance grid reliability. Under a multi-million dollar contract, Eaton has agreed to provide engineering services and equipment for Units 1 to 3 at FirstEnergy's Eastlake, Ohio power plant.

The project will allow the Eastlake plant to continue to provide an important service to regional electric consumers after it stops generating electricity in September. By retiring coal-fired boilers and converting the generators to synchronous condensers, the plant will be able to adjust conditions on the electric power transmission grid by stabilizing grid voltage.

In Tuesday's regular trading session, FE is currently trading at $31.21, down $0.49 or 1.55 percent on a volume of 0.82 million shares.