Morgan Stanley is bullish on FirstEnergy after management change
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Analysts at Morgan Stanley on Friday said they were optimistic about the future of FirstEnergy (NYSE:FE) as the Ohio utility company replaces its retiring CEO and explores a strategic asset sale.
FirstEnergy yesterday announced that Steven E. Strah had retired as president and CEO of the company. John W. Somerhalder II, chair of the board of directors was named interim president and CEO as the company seeks a permanent successor.
"Yesterday's conclusion of the management review and the management transition underway together begin to resolve a key overhang on the stock around CEO uncertainty," David Arcaro, analyst at Morgan Stanley, said in a Sept. 16 report.
FirstEnergy two years ago fired its CEO after an internal review that coincided with a government probe of the company’s possible role in an alleged bribery scandal. Former Ohio House Speaker Larry Householder and several associates were charged with racketeering for allegedly accepting $60 million in bribes to support a bailout of troubled nuclear power plants. A jury will begin hearing arguments in the case against Householder, who pleaded not guilty, in January.
FirstEnergy plans to possibly sell a minority interest in a power transmission or distribution asset, which would improve the company's finances.
"The potential for an accretive sale of a minority interest in the business and resulting improvement to the balance sheet supports a higher valuation and could come in the next few months," Arcaro said in the report.
Morgan Stanley rates FirstEnergy as an Overweight with a price target of $53 a share. The stock rose 1.7% to $41.09 by 2:40 p.m. ET on Friday.
Seeking Alpha contributor Daniel Jones has a Buy rating on FirstEnergy (FE) on its valuation.