FirstEnergy (NYSE:FE) was downgraded by Jefferies Group (NYSE:JEF) from "Hold" to "Underperform," citing the upcoming merger with Allegheny Energy (NYSE:AYE), which they believe will dilute the company.
Jefferies said, "... a reduction in our earnings estimates and expected dilution from the proposed merger with AYE. The decrease in power and natural gas prices makes FE and AYE transaction dilutive in the first full year of combined operations."
Earnings per share for 2011 were cut from $3.85 to $3.50 and 2012 earnings per share from $3.00 to $2.80.
The price target on FirstEnergy was also drastically cut, lowering it from $38 to $31.
FirstEnergy closed Tuesday at $36.71, falling $0.63, or 1.69 percent.
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