On Nov 28, we have issued an updated research report on Exelon Corporation (EXC). The company’s systematic investments in diversifying its power generation portfolio, strategic acquisitions and asset monetization program will likely boost its future performance. In addition, its practice of paying regular dividends is commendable. However, stringent government regulations and commodity price volatility are concerning.
This Zacks Rank #3 (Hold) stock’s third-quarter 2014 earnings per share and revenues surpassed the Zacks Consensus Estimate, primarily on the back of strong performance of its utility and generation business. The quarterly earnings were in line with the year-ago figure.
Exelon’s operations are exposed to huge operational risk as it primarily utilizes nuclear fuel for power generation. The company’s current focus on expanding its renewable and natural gas power generating assets is appreciable. The shift in its generation portfolio will help reduce the chances of accidents at its plants.
Exelon’s acquisition strategy involves buying assets in the same line of business. The company recently acquired Integrys Energy Services Inc. from Integrys Energy Group, Inc. (TEG). Previously, the company had acquired Constellation Energy, ETC ProLiance Energy and several others. These initiatives will enable the company to increase its scale of operations.
Exelon is currently working on its merger with Pepco Holdings, Inc. (POM). This transaction is expected to be concluded in the second or third quarter of 2015. The proposed merger will help to expand its presence in the Mid-Atlantic region.
In addition, Exelon pursues an asset divestment program the proceeds of which are utilized in profitable ventures in sync with its long-term growth strategy.
On the flip side, Exelon’s generation and energy delivery businesses are regulated. Any modification in government rules may disrupt the company’s operations and force it to install new infrastructure at its utility systems, which will subsequently impact its financial results.
Key Pick from the Sector
Another better-ranked stock in the sector is PG&E Corporation (PCG), carrying a Zacks Rank #1 (Strong Buy).
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