Did FirstEnergy meet its third-quarter 2024 expectations?

Operating EPS of $0.85 was within the company's guidance range, though down from $0.88 in 3Q23. Higher storm restoration costs, the absence of 3Q23 income tax benefits, and dilution from the 30% sale of FirstEnergy Transmission were offset by rate base growth and higher weather-related demand.

Why did the full-year 2024 guidance range narrow, and what does it imply?

The top end was cut to $2.71 from $2.81 while the low end of $2.61 was kept. The cut reflects mild weather versus normal, lower Ohio distribution revenues under ESP V, and significantly higher third-quarter storm restoration costs, partly offset by lower operating expenses.

Is the long-term growth outlook still intact?

Management affirmed its 6–8% targeted annual operating EPS growth, based on the prior-year midpoint, and a ~9% average annual rate base growth tied to the ~$26B Energize365 plan for 2024–2028. It also stated no incremental equity is expected through the planning period beyond employee benefit programs of up to ~$100M annually.

What are the main risks flagged in the release?

Key risks include ongoing government investigations and litigation related to Ohio HB 6 (including a Deferred Prosecution Agreement), regulatory outcomes such as the Ohio ESP V withdrawal and Ohio audits, storm and weather variability, pension market sensitivity, environmental remediation exposure for legacy coal ash sites, and the potential for future GAAP special items that management cannot reliably forecast.

Why is GAAP EPS so far below operating EPS year-to-date?

Year-to-date GAAP EPS of $1.25 versus operating EPS of $1.96 reflects $0.71 of special items, mainly a $0.28 asset retirement obligation regulatory change (McElroy's Run coal ash transfer and legacy coal residual remediation), $0.12 of debt-related costs, $0.10 of investigation costs, and $0.08 of strategic transaction charges.

FE 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed October 29, 2024. Cited figures are marked; the original filing is the authoritative source.

FirstEnergy (FE) reported third-quarter 2024 GAAP earnings from continuing operations of $0.73^a per share ($419 million) and operating (non-GAAP) earnings of $0.85 per share, within its guidance range but down from $0.88 in 3Q23.

Revenue rose to $3.7 billion^b. The quarter's GAAP-to-operating gap of $0.12 was driven mainly by FE Forward cost-to-achieve charges ($0.08) and investigation-related costs ($0.03). Year-to-date operating EPS of $1.96 was modestly above the prior-year $1.94, while GAAP EPS fell to $1.25 from $1.66, largely due to the $0.28 asset retirement obligation regulatory change and debt-related and strategic transaction costs.

Management narrowed full-year 2024 operating EPS guidance to $2.61^c–$2.71 from $2.61–$2.81, mainly reflecting mild weather, lower Ohio distribution revenues under the ESP V order, and higher third-quarter storm restoration costs, partly offset by lower operating expenses. The company raised its 2024 capital plan by $300 million to $4.6 billion (about 24% above 2023) and affirmed its 6–8% long-term operating EPS growth target and its roughly $26 billion 2024–2028 Energize365 program with about 9% average rate base growth. The company also withdrew from its Ohio ESP V, reverting to ESP IV, and reached a constructive Pennsylvania base rate case settlement with a $225 million revenue adjustment, effective January 2025 pending commission approval.

Credit and financing momentum was positive: Fitch upgraded FE Corp. to BBB, the company has received 40 notches of upgrades across the three agencies this year, and it has about $6 billion^d of liquidity. Management also highlighted growing data center and large-load demand, with 500MW+ load study requests more than tripling versus 2023, and a pending transmission joint development agreement with AEP and Dominion expected to yield project approvals in late February 2025. Investors should weigh the strong regulated growth outlook against recurring storm, legal investigation, and rate-case risks.

02—Key points

Key Highlights

3Q24 operating EPS of $0.85 vs. $0.88 in 3Q23 (within guidance); GAAP EPS of $0.73 vs. $0.74
2024 operating EPS guidance narrowed to $2.61–$2.71 (low end unchanged, top end cut from $2.81), citing mild weather, Ohio ESP V impacts, and higher storm costs
2024 capital investment plan raised to $4.6B from $4.3B (+7%, +24% vs. 2023); affirmed ~$26B 2024–2028 Energize365 plan and 6–8% long-term operating EPS growth
Pennsylvania base rate case settlement ($225M revenue adjustment, rates effective 1/1/2025) is the fourth constructive rate outcome since late 2023, totaling nearly $450M of annual revenue adjustments
Ohio ESP V withdrawn, reverting to ESP IV until an ESP VI is filed (expected early 2025), a move management says avoids uncertainty over key conditions
Credit upgrades: Fitch raised FE Corp. to BBB (Oct. 2); 40 total notches of upgrades this year across three agencies; ~$6B total liquidity as of 10/28/24
Growth pipeline: data center/large-load requests (500MW+) more than tripled vs. 2023; pursuing incremental transmission via JDA with AEP and Dominion, with approvals expected late February 2025

03—Questions

Frequently Asked Questions

Did FirstEnergy meet its third-quarter 2024 expectations?
Operating EPS of $0.85 was within the company's guidance range, though down from $0.88 in 3Q23. Higher storm restoration costs, the absence of 3Q23 income tax benefits, and dilution from the 30% sale of FirstEnergy Transmission were offset by rate base growth and higher weather-related demand.
Why did the full-year 2024 guidance range narrow, and what does it imply?
The top end was cut to $2.71 from $2.81 while the low end of $2.61 was kept. The cut reflects mild weather versus normal, lower Ohio distribution revenues under ESP V, and significantly higher third-quarter storm restoration costs, partly offset by lower operating expenses.
Is the long-term growth outlook still intact?
Management affirmed its 6–8% targeted annual operating EPS growth, based on the prior-year midpoint, and a ~9% average annual rate base growth tied to the ~$26B Energize365 plan for 2024–2028. It also stated no incremental equity is expected through the planning period beyond employee benefit programs of up to ~$100M annually.
What are the main risks flagged in the release?
Key risks include ongoing government investigations and litigation related to Ohio HB 6 (including a Deferred Prosecution Agreement), regulatory outcomes such as the Ohio ESP V withdrawal and Ohio audits, storm and weather variability, pension market sensitivity, environmental remediation exposure for legacy coal ash sites, and the potential for future GAAP special items that management cannot reliably forecast.
Why is GAAP EPS so far below operating EPS year-to-date?
Year-to-date GAAP EPS of $1.25 versus operating EPS of $1.96 reflects $0.71 of special items, mainly a $0.28 asset retirement obligation regulatory change (McElroy's Run coal ash transfer and legacy coal residual remediation), $0.12 of debt-related costs, $0.10 of investigation costs, and $0.08 of strategic transaction charges.

04—Continue

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