How did FirstEnergy perform in 2023 relative to its guidance?

Operating (non-GAAP) EPS was $2.56, above the midpoint of the company's guidance range and up from $2.41 in 2022. GAAP EPS from continuing operations was $1.96. The gap between GAAP and operating results reflects about $0.60 per share of special items, mainly strategic transaction costs tied to the FET interest sales, enhanced employee retirement costs, and investigation-related expenses.

What is FirstEnergy's 2024 earnings outlook?

Management guided to 2024 Operating EPS of $2.61 to $2.81, about 7% growth over the 2023 guidance midpoint, and Q1 2024 Operating EPS of $0.48 to $0.58. Drivers include new base rates in Integrated segments, transmission rate base growth, and normal weather, partly offset by the dilution from the FET 30% sale (about -$0.16 per share), higher effective tax rate, and lower Signal Peak earnings. GAAP guidance is not provided because special items are difficult to forecast.

What is Energize365 and how is it funded?

Energize365 is a $26 billion capital investment plan for 2024-2028 focused on transmission and distribution grid modernization, reliability, and the energy transition. Capex rises from $4.3 billion in 2024 to $6.2 billion in 2028. Management says it will be funded through operating cash flow (about $4 billion per year by 2024), regulated debt, and the FET 30% sale proceeds, with no incremental common equity planned beyond employee benefit program needs.

What are the main risks highlighted for investors?

The forward-looking statements flag ongoing government investigations and litigation related to Ohio House Bill 6, including potential impacts on rate matters and derivative shareholder lawsuits. They also cite compliance with the July 2021 Deferred Prosecution Agreement, regulatory outcomes, pension funding sensitivity, credit rating actions, and the ability to close the FET sale. Investors should also note that the 6-8% EPS growth target depends on executing rate filings and Energize365.

Is FirstEnergy's dividend growing, and what is the payout policy?

The company resumed dividend growth in 2023, declaring $1.60 per share. For 2024 it plans four quarterly dividends of $0.425 per share ($1.70 total, subject to board approval), a 6.25% increase. The company targets a 60-70% payout ratio and expects dividend growth to track Operating EPS growth through 2028.

FE 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed February 8, 2024. Cited figures are marked; the original filing is the authoritative source.

FirstEnergy (FE) reported full-year 2023 GAAP earnings from continuing operations of $1.123 billion^a, or $1.96 per share, versus $0.71 in 2022, and Operating (non-GAAP) EPS of $2.56, above the midpoint of guidance and up from $2.41.

Fourth-quarter GAAP EPS was $0.30^b and Operating EPS was $0.62, within the upper half of the $0.55-$0.65 guidance range. Results were weighed down by mild weather (roughly $0.28 per share year over year on a full-year basis) and a lower pension credit, offset by lower operating expenses, rate case and formula-rate investment growth, and a lower effective tax rate. Note that the 2023 GAAP figure includes roughly $0.60 per share of special items, including strategic transaction, enhanced retirement, and investigation-related costs.

Management issued 2024 Operating EPS guidance of $2.61 to $2.81^c (about 7% growth over the 2023 guidance midpoint) and first-quarter 2024 guidance of $0.48 to $0.58. The company affirmed a 6% to 8% long-term annual Operating EPS growth target and introduced Energize365, a $26 billion capital plan for 2024-2028 that lifts the rate base from $29 billion in 2024 to $41 billion in 2028 (about 9% annual growth). Management states no incremental common equity is needed through the plan period, beyond employee benefit programs of up to about $100 million per year.

Dividend guidance calls for four $0.425^d quarterly dividends in 2024 ($1.70 annualized, subject to board approval), a 6.25% increase. The key balance sheet item is the pending sale of a 30% interest in FirstEnergy Transmission, LLC to Brookfield for about $3.5 billion, expected to close in early 2024. Management expects the proceeds to support credit metrics, with an FFO/Debt target of 14% to 15%, and the company has a Moody's review for upgrade.

The filing is furnished under Items 2.02 and 7.01, so the Exhibit 99 materials are not deemed filed for Exchange Act purposes. Investors should weigh guidance and long-term targets against the ongoing government investigations related to HB 6 and the company's DPA compliance risk.

02—Key points

Key Highlights

FY2023 GAAP EPS of $1.96 (vs. $0.71 in 2022); Operating (non-GAAP) EPS of $2.56 (vs. $2.41), above the guidance midpoint
Q4 2023 GAAP EPS of $0.30; Operating EPS of $0.62, in the upper half of the $0.55-$0.65 guidance range
2024 Operating EPS guidance of $2.61-$2.81 (~7% growth over the 2023 guidance midpoint); Q1 2024 guidance of $0.48-$0.58
Energize365 $26B capital plan (2024-2028), with rate base growing ~9% annually to $41B by 2028 and no incremental equity needed beyond employee benefit programs (~$100M/yr)
Affirmed 6-8% long-term annual Operating EPS growth; dividend plan of $1.70/share for 2024 (four $0.425 quarterly payments, +6.25%)
Pending sale of 30% of FirstEnergy Transmission, LLC to Brookfield (~$3.5B, expected to close early 2024) to fund deleveraging; FFO/Debt target 14-15%
Weather headwind of about $0.28/share in 2023 and lower pension credits offset by lower O&M and a lower effective tax rate (16.2% vs. 20.9%)

03—Questions

Frequently Asked Questions

How did FirstEnergy perform in 2023 relative to its guidance?
Operating (non-GAAP) EPS was $2.56, above the midpoint of the company's guidance range and up from $2.41 in 2022. GAAP EPS from continuing operations was $1.96. The gap between GAAP and operating results reflects about $0.60 per share of special items, mainly strategic transaction costs tied to the FET interest sales, enhanced employee retirement costs, and investigation-related expenses.
What is FirstEnergy's 2024 earnings outlook?
Management guided to 2024 Operating EPS of $2.61 to $2.81, about 7% growth over the 2023 guidance midpoint, and Q1 2024 Operating EPS of $0.48 to $0.58. Drivers include new base rates in Integrated segments, transmission rate base growth, and normal weather, partly offset by the dilution from the FET 30% sale (about -$0.16 per share), higher effective tax rate, and lower Signal Peak earnings. GAAP guidance is not provided because special items are difficult to forecast.
What is Energize365 and how is it funded?
Energize365 is a $26 billion capital investment plan for 2024-2028 focused on transmission and distribution grid modernization, reliability, and the energy transition. Capex rises from $4.3 billion in 2024 to $6.2 billion in 2028. Management says it will be funded through operating cash flow (about $4 billion per year by 2024), regulated debt, and the FET 30% sale proceeds, with no incremental common equity planned beyond employee benefit program needs.
What are the main risks highlighted for investors?
The forward-looking statements flag ongoing government investigations and litigation related to Ohio House Bill 6, including potential impacts on rate matters and derivative shareholder lawsuits. They also cite compliance with the July 2021 Deferred Prosecution Agreement, regulatory outcomes, pension funding sensitivity, credit rating actions, and the ability to close the FET sale. Investors should also note that the 6-8% EPS growth target depends on executing rate filings and Energize365.
Is FirstEnergy's dividend growing, and what is the payout policy?
The company resumed dividend growth in 2023, declaring $1.60 per share. For 2024 it plans four quarterly dividends of $0.425 per share ($1.70 total, subject to board approval), a 6.25% increase. The company targets a 60-70% payout ratio and expects dividend growth to track Operating EPS growth through 2028.

04—Continue

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