Bank of America upgrades FirstEnergy, says regulated growth is key to success

Bank of America Merrill Lynch issued a company note on FirstEnergy Corporation

after a meeting with senior management. Bank of America upgraded FirstEnergy from Neutral to Buy and currently has set a $40 price target. Brian Chin, an analyst at Bank of America Merrill Lynch, wrote, "We find FirstEnergy's focus on balance sheet repair, deregulated stabilization, and regulated growth to be a welcome shift. Prior utilities shifting from deregulation have tended to see boosted relative valuations and improved financials since the last recession. We believe at some point FE shares will begin to trade more consistently with its more purely regulated peer group in the same manner." Bank of America left the meeting with management more confident in the strategic push towards a more regulated-like business focus. CEO Chuck Jones is focused on reducing operating expenses, particularly fuel /commodity purchases. Management believes that the company will not have to issue external equity to cover expenses, thus giving investors more value for the capital that they invest. FirstEnergy Corporation closed Tuesday at $35.81.