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It's been a tough five years for FirstEnergy (FE), the nation's fifth-largest publicly owned utility. First the company had some bad publicity for its role in America's biggest blackout. Efforts to overcome that blunder and improve operations have left investors seemingly unimpressed, and there are still concerns about the effects of rising fuel costs, stricter pollution laws, and reduced electricity demand. With a $73.63 close on Friday, well below its 52-week high of 84, Barron's sees potential for this stock to shine.

Improved efficiency and growth in its unregulated businesses (including all power-generation assets) should help FirstEnergy's profits increase almost 27% next year. Profit will be further helped by a rate-hike that FirstEnergy hopes to implement in its Ohio market this coming year and in Pennsylvania in 2011 when rates are deregulated. These factors, as well as FirstEnergy's diversified fuel sources, have the potential to raise the stock price as well as the $2.20/share dividend. The dividend has been raised five times in four years and CFO Richard Marsh says further increases are important to the company.

Analysts estimate 2009 earnings will be around $5.43 a share, compared to this year's expected $4.29. Greg Gordon, of Citi Investment Research, believes the stock could reach $82 within twelve months.

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Of note, FirstEnergy (FE) is the top holding of PowerShares Dynamic Utilities (PUI) ETF.

Source: FirstEnergy is Ready to Shine - Barron's