Barclays (NYSE:BCS) says it's maintining an "Equalweight" rating on FirstEnergy (NYSE:FE), citing WV merger recommendations as being not as constructive as hoped for.
Barclays said, "We prefer owning FE for its 5.7% dividend yield to Allegheny Energy (NYSE:AYE) ; (Equalweight rating) which we expect could go to $19/share on a deal break (12.3x our $1.55 in 2012). We view the WV recommendations as less than constructive as expected, but not insurmountable to merger approval. Regulated synergies are only 17% of the transaction post an equal sharing, but the Staff recommendation is more negative. Our forecasts show the deal to be accretive in 2013 at $3.19 versus $3.11 standalone."
FirstEnergy has also had problems keeping its gross margins at past levels, and have taken on more debt over the last several years, increasing their debt-to-equity ratio.
The energy company does have an ex dividend date on November 3, 2010.
They closed Friday at $38.93, gaining $0.28, or 0.72 percent. Barclays has a price target of $38 a share on them.
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