Barclays upgrades FirstEnergy stock to Overweight on undervalued growth plan

Barclays upgraded FirstEnergy Corp. (NYSE:FE) to Overweight, raising its price target to $49.00, citing an undervalued management plan trading at an 11% P/E discount and potential for consensus earnings revisions and multiple re-rating through 2026. This positive outlook is reinforced by the utility's recent Q2 2025 earnings, which met EPS expectations and slightly exceeded revenue, bolstered by new rates and investments, alongside similar price target increases from Mizuho and Jefferies, reflecting confidence in FE's strategic execution and capital plans, including addressing legacy Ohio concerns and potential rate base CAGR to 10%.

Analysis

FirstEnergy Corp. (FE) has received a significant vote of confidence from Barclays, which upgraded the stock to Overweight from Equalweight and raised its price target to $49.00 from $43.00. The upgrade is predicated on the view that the company's management growth plan is undervalued, with the stock currently trading at an 11% P/E discount. Barclays anticipates that successful execution on strategic initiatives could trigger consensus earnings revisions and a multiple re-rating through 2026. This outlook is supported by several potential catalysts, including the expected resolution of legacy Ohio regulatory concerns by late 2025 and a potential 10% compound annual growth rate (CAGR) in the rate base, driven by capital investments in transmission and generation. Furthermore, upcoming proposals in West Virginia could add approximately 2% to EPS estimates that are already above consensus. The bullish sentiment is underpinned by solid recent performance, as FirstEnergy's Q2 2025 earnings met expectations with an EPS of $0.52 and slightly beat on revenue at $3.4 billion, reflecting the benefits of new rates and distribution investments. Other firms are also showing increased optimism, with both Mizuho and Jefferies raising their price targets to $45, although Mizuho maintains a Neutral rating, suggesting some execution or regulatory risks are still being watched. The company's stable 28-year dividend history, providing a 4.06% yield, adds a layer of appeal for income-focused investors.

Key Decisions for Investors

• Investors should consider the Barclays upgrade and 11% P/E discount as a potential entry point, as successful execution of the company's capital plan could lead to a significant multiple re-rating and capital appreciation.
• Key catalysts to monitor are the outcome of the Ohio General Rate Case by late 2025 and progress on the capital plan, which is projected to drive a 10% rate base CAGR.
• While the outlook is positive, the Neutral rating from Mizuho suggests investors should watch for broad consensus earnings revisions to validate the bullish thesis before significantly increasing exposure.
• For income-focused portfolios, FirstEnergy's consistent 28-year dividend payment history and current 4.06% yield offer an attractive and stable income stream, now complemented by a clearer path to growth.