Data Center Demand & Infrastructure Investments Aid FirstEnergy

FirstEnergy Corporation FE benefits from its widespread transmission and distribution assets, enabling it to cater to data center demand and efficiently serve six million customers. Its strategic capital investment for infrastructure development increases grid reliability, reduces emissions and supports its long-term earnings growth. 

This Zacks Rank #2 (Buy) company faces risks from the uncertainty of rate approval and an increase in compliance costs that can reduce profit margin.

FE’s Tailwinds

FirstEnergy benefits from its widespread transmission and distribution network in the United States. The systematic investments made in transmission and distribution networks continue to strengthen FirstEnergy’s operation. The company has increased its 2026-2030 capital plan by 30% to $36 billion, including $19 billion for transmission projects across stand-alone transmission and integrated segments, representing a 35% rise from the prior plan.  

The company gains from enhancing grid reliability and renewable generation assets, which enables it to provide reliable, clean electricity during adverse weather conditions. FirstEnergy Transmission and Transource Energy have formed a joint venture, securing approval for a project in Central Ohio. The project includes more than 300 miles of new 765-kilovolt transmission lines and multiple substations upgrades, which support the company’s long-term financial performance.

FirstEnergy is riding the energy transition wave and aims to add 1,200 megawatts (MW) of natural gas combined cycle generation by 2031 and 70 MW of utility-scale solar generation in 2028. In 2015, FirstEnergy set a goal of reducing CO2 emissions by at least 90% below 2005 levels by 2045. In November 2020, it updated its target to become 100% carbon neutral by 2050.

FE’s strategic capital investment supports infrastructure development and technological upgrades, driving rate base growth and strengthening long-term earnings visibility. The company’s Energize365 platform prioritizes maintaining customer affordability, with rates at or below those of in-state peers, while improving service quality, operational efficiency and supporting the company’s long-term growth initiatives.

FE’s Headwinds

FirstEnergy's base rate request approval is uncertain. Any denial or delay in rate request approvals could adversely affect the company’s operations, cash flows, financial condition and overall earnings stability.

The company operates coal-fired generating plants that must comply with environmental regulations. These can lead to higher compliance costs, increased capital spending and potential pressure on profitability.

Price Performance of FE

In the past three months, FirstEnergy shares have rallied 14.2% compared with the industry’s 12.4% growth.

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Other Stocks to Consider

Some other top-ranked stocks in the same industry are CMS Energy CMS, CenterPoint Energy CNP and DTE Energy DTE. Each stock currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CMS, CNP and DTE have dividend yields of 2.91%, 2.11% and 3.16%, respectively, which is better than the Zacks S&P 500 Composite’s yield of 1.47%.

The Zacks Consensus Estimate for CMS Energy, CenterPoint Energy and DTE Energy’s 2026 EPS is pegged at $3.86, $1.91and $7.72, suggesting year-over-year growth of 6.93%, 8.52% and 4.89%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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