FirstEnergy Announces Third Quarter 2020 Financial Results

Rhea-AI Summary

FirstEnergy Corp. reported GAAP earnings of $454 million, or $0.84 per share, for Q3 2020, slightly above the company's guidance. Revenue remained steady at $3 billion. In comparison, Q3 2019 earnings were $391 million, or $0.73 per share. The company updated its full-year GAAP earnings forecast to $700 million to $1.16 billion. Additionally, FirstEnergy aims for a 6% to 8% annual growth rate through 2021, supported by a planned $600 million equity issuance starting in 2022.

Positive

• GAAP earnings for Q3 2020 increased to $454 million from $391 million in Q3 2019.
• Updated full-year GAAP earnings forecast: $700 million to $1.16 billion.
• Operating (non-GAAP) earnings exceeded guidance by one cent, at $0.84 per share.
• Residential sales grew by 5.1% despite overall distribution deliveries decreasing.

Negative

• Total distribution deliveries dropped by 1.7% year-over-year, affecting commercial and industrial sales.

AKRON, Ohio, Nov. 2, 2020 /PRNewswire/ -- FirstEnergy Corp. (NYSE: FE) today reported third quarter 2020 GAAP earnings of $454 million, or $0.84 per basic and diluted share of common stock, on revenue of $3 billion. In the third quarter of 2019, FirstEnergy reported GAAP earnings of $391 million, or $0.73 per basic share of common stock ($0.72 diluted), on revenue of $3 billion. Third quarter 2019 results include the impact of special items listed below.

Operating (non-GAAP) earnings* for the third quarter of 2020 were also $0.84 per share, one cent per share above the company's guidance range. In the third quarter of 2019, operating (non-GAAP) earnings were $0.76 per share.  

"Our strong third quarter results reflect the hard work, resiliency and attention to safety demonstrated by our employees during this year of unprecedented challenges," said Steven E. Strah, FirstEnergy's acting chief executive officer.

"While our Board initiated changes to our leadership team last week, our company's primary focus remains the same: providing reliable service to our customers and executing our growth initiatives," he said.

FirstEnergy updated its full-year 2020 GAAP earnings forecast range to $700 million to $1.16 billion, or $1.29 to $2.14 per share based on 542 million shares outstanding, and affirmed its full-year operating (non-GAAP) earnings guidance of $2.40 to $2.60 per share.

The company also affirmed its long-term growth rate projections. FirstEnergy remains on track to achieve 6% to 8% compound annual operating (non-GAAP) earnings growth (CAGR)** from 2018 to 2021, as well as its extended CAGR of 5% to 7% through 2023. That projection includes plans to issue up to $600 million of equity annually starting in 2022 to fund the company's regulated growth initiatives.

Third Quarter Results           

In FirstEnergy's Regulated Distribution business, third quarter 2020 operating results benefited from higher residential volume, incremental rider revenues in Ohio and Pennsylvania, and weather-related usage. These drivers were partially offset by higher depreciation expense compared to the third quarter of 2019.  

Total distribution deliveries decreased 1.7% compared to the third quarter of 2019, primarily due to the impact of the pandemic on commercial and industrial sales. Residential sales increased 5.1% as many people continue to work and attend school from home. Commercial deliveries decreased 5.5%, while sales to industrial customers decreased 6.3%.

In the Regulated Transmission business, third quarter 2020 operating results were flat compared to the same period in 2019 as higher rate base associated with the company's ongoing investments in its Energizing the Future transmission program were offset by higher net financing costs and taxes.

In the Corporate/Other segment, third quarter 2020 operating results reflect higher tax benefits compared to the same quarter of 2019, partially offset by higher expenses.

For the first nine months of 2020, FirstEnergy reported GAAP earnings of $837 million, or $1.54 per basic and diluted share of common stock, on revenue of $8.3 billion. This compares to GAAP earnings of $1 billion, or $1.90 per basic share of common stock ($1.89 diluted), on revenue of $8.4 billion in the first nine months of 2019. Results for both periods reflect the impact of special items listed below.

Operating (non-GAAP) earnings* for the first nine months of 2020 were $2.07 per share, compared to $2.04 per share in the first nine months of 2019.

	Consolidated GAAP Earnings to Operating (Non-GAAP) EPS* Reconciliation
		Third Quarter			Year-to-Date			2020 Estimates
		2020	2019		2020	2019		Full Year
	Net Income attributable to Common Stockholders (GAAP) - $M	$454	$391		$837	$1,016		$700 - $1,160
	Earnings Per Share	$0.84	$0.73		$1.54	$1.90		$1.29 - $2.14
	Excluding Special Items*:
	Pension/OPEB Mark-to-market adjustments –
	Q1 Remeasurement	–	–		0.59	–		0.59
	Q4 Estimated Remeasurement***	–	–		–	–		0.58 – (0.07)
	Impact of full dilution	–	–		–	(0.01)		–
	Regulatory charges	–	–		0.01	(0.01)		0.01
	Exit of competitive generation	–	0.03		(0.07)	0.16		(0.07)
	Total Special Items*	–	0.03		0.53	0.14		1.11 –0.46
	Operating EPS (non-GAAP)	$0.84	$0.76		$2.07	$2.04		$2.40 - $2.60
	Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the number of shares outstanding for the period assuming full impact of dilution from the $2.5 billion equity issuance in January 2018. The current and deferred income tax effect, which ranges from 21% to 29% in all periods, was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount if deductible/taxable. *** Based on current discount rates ranging from 2.7% - 3.0% for the pension and OPEB plans, and actual gains since the last remeasurement date of February 27, 2020, through September 30, 2020, of 6.1% and 5.0% for the Pension and OPEB plan assets, respectively. Pension and OPEB plan assets have gained approximately 9.2% and 5.7%, respectively, for the nine months ended September 30, 2020.

Non-GAAP financial measures
* Operating earnings (loss) excludes "special items" as described below, and is a non-GAAP financial measure. Special items represent charges incurred or benefits realized that management believes are not indicative of, or may obscure trends useful in evaluating the Company's ongoing core activities and results of operations or otherwise warrant separate classification. Special items also reflect the adjustment to include the full impact of share dilution from the $2.5 billion equity issuance in January 2018. Special items are not necessarily non-recurring. Management uses Operating earnings (loss) and Operating earnings (loss) per share to evaluate the Company's performance and manage its operations and frequently references these non-GAAP financial measures in its decision making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Operating earnings (loss) per share by segment to further evaluate the Company's performance by segment and references this non-GAAP financial measure in its decision making. Operating earnings (loss) per share and Operating earnings (loss) per share for each segment is calculated by dividing Operating earnings (loss), which excludes special items as discussed herein, for the periods presented in 2020 by 542 million shares, 540 million shares for the third quarter of 2019 and 539 million shares in the first nine months of 2019, which reflects the full impact of share dilution from the equity issuance in January 2018. Basic EPS (GAAP) is based on 542 million shares for the periods presented in 2020, and 538 million and 533 million shares for the third quarter and first nine months of 2019, respectively. Management believes that the non-GAAP financial measures of Operating earnings (loss) and Operating earnings (loss) per share and Operating earnings (loss) per share by segment provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measures are useful to shareholders and other interested parties to understand performance trends and evaluate the Company against its peer group by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or across the Company's peer group. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). These non-GAAP financial measures are intended to complement, and are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities. Pursuant to the requirements of Regulation G, FirstEnergy has provided, where possible without unreasonable effort, quantitative reconciliations within this presentation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

** The Company's management team cannot estimate on a forward-looking basis the impact of special items in the context of Operating earnings (loss) per share growth projections because special items, which could be significant, are difficult to predict and may be highly variable. Consequently, the Company is unable to reconcile Operating earnings (loss) per share growth projections to a GAAP measure without unreasonable effort.

Investor Materials and Teleconference

FirstEnergy's Strategic and Financial Highlights and Investor Factbook are posted on the company's Investor Information website – www.firstenergycorp.com/ir. To access the report, click on the Third Quarter 2020 Financial Results link.

The company invites investors, customers and other interested parties to listen to a live webcast of its teleconference for financial analysts and view presentation slides at 9 a.m. EDT today. FirstEnergy management will present an overview of the company's financial results, followed by a question-and-answer session. The teleconference and presentation can be accessed on the website by selecting the Third Quarter 2020 Earnings Webcast link. The webcast and presentation will be archived on the website.

FirstEnergy is dedicated to safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation's largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company's transmission subsidiaries operate approximately 24,500 miles of transmission lines that connect the Midwest and Mid-Atlantic regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online at www.firstenergycorp.com.

Forward-Looking Statements: This news release includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "forecast," "target," "will," "intend," "believe," "project," "estimate," "plan" and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the results of our ongoing internal investigation and evaluation of its controls framework, the extent and duration of COVID-19 and the impacts to our business, operations and financial condition resulting from the outbreak of COVID-19 including, but not limited to, disruption of businesses in our territories, volatile capital and credit markets, legislative and regulatory actions, the effectiveness of our pandemic and business continuity plans, the precautionary measures we are taking on behalf of our customers, contractors and employees, our customers' ability to make their utility payment and the potential for supply-chain disruptions; the risks and uncertainties associated with government investigations regarding Ohio House Bill 6 and related matters including potential adverse impacts on federal or state regulatory matters; the risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets, including, but not limited to, risks associated with the decommissioning of TMI-2; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, executing our transmission and distribution investment plans, controlling costs, improving our credit metrics, strengthening our balance sheet and growing earnings; economic and weather conditions affecting future operating results, such as a recession, significant weather events and other natural disasters, and associated regulatory events or actions in response to such conditions; changes in assumptions regarding economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities; changes in customers' demand for power, including, but not limited to, the impact of climate change or energy efficiency and peak demand reduction mandates; changes in national and regional economic conditions affecting us and/or our major industrial and commercial customers or others with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; the ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates; changes to environmental laws and regulations, including, but not limited to, those related to climate change; changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts and other trust funds, or causing us to make contributions sooner, or in amounts that are larger, than currently anticipated; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, or adverse tax audit results or rulings; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions; actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity; and the risks and other factors discussed from time to time in our SEC filings. Dividends declared from time to time on FirstEnergy Corp.'s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.'s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy Corp.'s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any current intention to update or revise, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.

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SOURCE FirstEnergy Corp.

FAQ

What were FirstEnergy's Q3 2020 earnings results?

FirstEnergy reported GAAP earnings of $454 million, or $0.84 per share, for Q3 2020.

How did FirstEnergy's Q3 2020 performance compare to Q3 2019?

In Q3 2019, FirstEnergy reported GAAP earnings of $391 million, or $0.73 per share, on the same revenue.

What is FirstEnergy's updated earnings forecast for 2020?

FirstEnergy updated its full-year GAAP earnings forecast to between $700 million and $1.16 billion.

What is FirstEnergy's guidance for operating earnings per share?

FirstEnergy affirmed its full-year operating earnings guidance of $2.40 to $2.60 per share.

What growth rate does FirstEnergy project through 2021?

FirstEnergy anticipates a compound annual operating earnings growth of 6% to 8% from 2018 to 2021.