FirstEnergy Corp. :FE-US: Earnings Analysis: Q1, 2017 By the Numbers : May 1, 2017

FirstEnergy Corp. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of FirstEnergy Corp. – American Electric Power Company, Inc. and NextEra Energy, Inc. (AEP-US and NEE-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 3501 million, Net Earnings of USD 205 million.
  • Gross margins narrowed from 25.90% to 24.36% compared to the same period last year, operating (EBITDA) margins now 27.82% from 30.51%.
  • Year-on-year change in operating cash flow of 21.89% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 3501 3375 3884 3341 3796
Revenue Growth (%YOY) -7.77 -4.69 -4.8 -3.13 -1.68
Earnings (mil) 205 -5796 380 -1089 328
Earnings Growth (%YOY) -37.5 -2464.6 -3.8 -682.35 47.75
Net Margin (%) 5.86 -171.73 9.78 -32.6 8.64
EPS 0.46 -13.45 0.89 -2.56 0.77
Return on Equity (%) 13.25 -261.32 13.27 -36.5 10.54
Return on Assets (%) 1.9 -48.75 2.94 -8.37 2.5

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Market Share Versus Profits

Revenues History
Earnings History

FE-US‘s change in revenue this period compared to the same period last year of -7.77% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that FE-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.73% and earnings by 103.54% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 25.90% to 24.36%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 30.51% to 27.82% in this time frame. For comparison, gross margins were 20.65% and EBITDA margins were 26.10% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

FE-US‘s change in operating cash flow of 21.89% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 18.52% to 16.62% and (2) one-time items that contributed to a decrease in pretax margins from 14.25% to 9.45%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for FirstEnergy Corp.

Company Profile

FirstEnergy Corp. operates as a diversified energy company. It engages in the generation, transmission, and distribution of electricity, as well as energy management and other energy-related services through its subsidiaries. It operates through the following segments: Regulated Distribution, Regulated Transmission, and Competitive Energy Services (CES). The Regulated Distribution segment distributes electricity through FirstEnergy’s utility operating companies, serving various customers within Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by FirstEnergy’s utilities and the regulatory assets. The CES segment supplies electricity to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Michigan, New Jersey and Maryland, and the provision of partial POLR and default service for some utilities in Ohio, Pennsylvania and Maryland, including the utilities. The company was founded in 1996 and is headquartered in Akron, OH.

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