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FirstEnergy Corp. (FE - Analyst Report) posted fourth-quarter adjusted earnings of 77 cents per share, topping the Zacks Consensus Estimate of 74 cents. The better-than-expected results were driven by lower operation and maintenance expenses, higher investment income, the impact of delivery service improvement riders in Ohio and a lower effective income tax rate.

However, earnings in the quarter were below $1.21 reported a year ago, primarily due to lower distribution and wholesale generation revenues, higher purchased power costs, reduced transition cost recovery in Ohio and higher pension costs.

For full year 2009, FirstEnergy’s adjusted earnings were $3.75 per share, above the Zacks Consensus Estimate of $3.47 but below last year’s earnings of $4.53.

Net revenue in the quarter decreased 8% year over year to $3.0 billion, hurt by reduced demand for electricity during the recession. In 2009, total revenue declined 5% to $13.0 billion.

Total electric distribution deliveries in the quarter decreased 3% compared to last year due to the economic downturn and mild weather in the FirstEnergy companies’ service territories. Residential and commercial deliveries declined 2% and 3%, respectively. Industrial deliveries slipped 3% on reduced usage by steel and automotive customers. Total electric distribution deliveries in 2009 were down 7% compared to 2008.

In the fourth quarter, total electric generation sales decreased 12%, with retail generation sales down 8% and wholesale sales down 27%, compared to the same period last year. Total electric generation sales in 2009 were down 9% year-over-year, with retail sales down 8% and wholesale sales down 14%. The yearly decline was primarily due to economic and weather conditions, and changes in generation supply and pricing for the Ohio load.

As of December 31, 2009, the company had cash and equivalents of $874 million and long-term debt of $11.9 billion. Cash flow from operating activities for the year totaled $2.5 billion compared to $2.2 billion last year.

Furthermore, the company reaffirmed its 2010 earnings guidance of $3.50 to $3.70 per share, which was originally announced on December 3, 2009.

Disclosure: None

Source: First Energy's Better Than Expected Earnings

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