We reiterate our Neutral recommendation on
Exelon Corporation
(
EXC
) considering its pending rate cases, erratic weather patterns in
its service territories, and depressed margins at its generation
fleet. But, these are expected to be offset by the company's strong
balance sheet, solid regulated utility operations, a high-return
merchant energy segment and steady utility investments in its
well-managed nuclear generating fleet.
There are several factors which are expected to obstruct
Exelon's financial and operational growth. We know that the
company's generation and energy delivery businesses are highly
regulated. Fundamental changes in rules and regulations can disrupt
Exelon's business plans and adversely affect its operations and
financial results.
On a positive note, Exelon recently completed its merger with
Constellation Energy. We believe this merger will boost the
company's position in terms of load capacity and customer base.
This merger will also enable Exelon to work on fuel innovation and
increase operational efficiency. These initiatives will
subsequently lower the power production costs of the company.
In addition, Exelon continues with its investments to upgrade
the plants, which will subsequently enable the company to produce
additional 420 million watts of carbon-free power in the next five
years. In the future, additional production will benefit the
company in terms of increasing its market share.
On the flip side, weather patterns and the related impact on
electricity and gas usage may affect Exelon's operational results.
Moderate temperatures in the summer and winter seasons adversely
impact the use of energy and the company's numbers. Additionally,
Exelon is affected by extreme weather conditions, such as
hurricanes and storms, in its service territories and other parts
of the U.S.
The Zacks Consensus Estimate for Exelon's second quarter and
full year 2012 earnings are currently pegged at 64 cents per share
and $2.78 per share, respectively.
Exelon Corporation currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating.
Chicago, Illinois-based Exelon Corporation is a utility services
holding company. It engages in the generation, transmission,
distribution and sale of electricity to residential, commercial,
industrial and wholesale customers. The company competes with
Ameren Corporation
(
AEE
).
AMEREN CORP (AEE): Free Stock Analysis Report
EXELON CORP (EXC): Free Stock Analysis Report
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