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Will Exelon (EXC) Beat on Earnings Again This Season?

Exelon CorporationEXC will release third-quarter 2015 financial results before the market opens on Oct 30, 2015. In the prior quarter, this utility reported a positive earnings surprise of 15.69%. Exelon currently has a Zacks Rank #2 (Buy). Let's see how things are shaping up at the company prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Exelon is likely to beat earnings because it has the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here.

Zacks ESP : Earnings ESP, which represents the difference between the Most Accurate estimate of 72 cents and the Zacks Consensus Estimate of 71 cents, is at +1.41%. This is a meaningful indicator of a likely positive earnings surprise for the shares.

Zacks Rank : The combination of Exelon's Zacks Rank #2 and +1.41% ESP makes us confident of a likely earnings beat.

We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions

What is Driving the Better-Than-Expected Earnings?

Exelon invests substantially in its infrastructure projects besides expanding its renewable and fossil fuel generating capacity, which will help the company to gradually reduce dependence on its nuclear fleet. During the quarter the company stared constructing two 1,000 MW low-carbon, combined-cycle gas turbine units in Texas.

On the second-quarter call, the company however guided third-quarter earnings in the range of 65 cents to 75 cents, lower than the 78 cents achieved in the prior-year quarter. The expected decline is due to a higher share count and the debt associated with the Pepco Holdings (POM) transaction.

The uncertainly hovering over the Exelon and Pepco Holdings POM merger was finally dispelled. On Oct 6, both the companies reached an agreement with the Government of the District of Columbia and other parties on their proposed merger.

The warmer-than-expected temperature during the third quarter is expected to have a positive impact on utility demand. With no unplanned outages of Exelon's well-maintained nuclear fleet in the third quarter, the higher volume of electricity produced will have a positive impact on the company's performance.

Other Stocks to Consider

Here are a couple of other operators in the electric utility space worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.

Ameren Corp. AEE has an Earnings ESP of +1.53% and carries a Zacks Rank #2.

Duke Energy Corp. DUK has an Earnings ESP of +0.66% and carries a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

EXELON CORP (EXC): Free Stock Analysis Report

AMEREN CORP (AEE): Free Stock Analysis Report

PEPCO HLDGS (POM): Free Stock Analysis Report

DUKE ENERGY CP (DUK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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