Exelon Corp. Beats on Q2 Earnings & Revenues, Gives Guidance


Exelon Corporation (EXC) announced second-quarter 2014 operating earnings of 51 cents per share, surpassing the Zacks Consensus Estimate by a penny. Operating earnings exceeded the guidance of 40 cents to 50 cents per share for the quarter.

Quarterly earnings however decreased 3.8% year over year due to lower realized prices, lesser output from nuclear plants owing to outages and higher operations and maintenance expenses.

On a GAAP basis, quarterly earnings were 60 cents per share compared with 57 cents per share a year ago.

The difference between GAAP and adjusted operating earnings of 9 cents was primarily due to the combined impact of a 1 cent mark-to-market loss from economic hedging activities, 3 cents of merger and integration related cost, a 3 cent charge for the amortization of commodity contract intangibles, 3 cents for non-controlling interests and 8 cents for asset impairments. One-time gains included a 9 cent gain from Decommissioning Trust (:NDT) Fund Investments and 18 cents from CENG integration.

Total Revenue

In second-quarter 2014, Exelon's total operating revenues of $6.2 billion beat the Zacks Consensus Estimate by 18.2%.

Quarterly revenues were 5.3% higher than the comparable year-ago period.

Segment Details

Generation: Segment revenues in the second quarter were $3.96 billion, up 4.2% year over year.

Commonwealth Edison Company (ComEd): Revenues in the second quarter were $1.13 billion, up 4.4% from the year-ago period.

PECO Energy Company (PECO): Second quarter revenues of $0.66 billion declined 2.4% from the year-ago period.

Baltimore Gas and Electric (BGE): Segment revenues were $0.65 billion, in line with the year-ago period.

Quarterly Highlights

In the quarter under review, Exelon's total operating expenses increased 9.1% year over year to $5.4 billion, mainly due to an increase in purchase power and fuel expenses as well as operating and maintenance expenses.

Operating income was $0.8 billion, down 15.7% from the year ago quarter.

In the second quarter, the company supplied 59,567 Gigawatt hours of electricity, down 3.5% year over year.

Financial Update

As of Jun 30, 2014, Exelon's cash balance was $1.36 billion compared with $1.6 billion at the end of 2013.

Long-term debt as of Jun 30, 2014 totaled $18.1 billion, up from $17.6 billion as of Dec 31, 2013.

In the first half of 2014, net cash flows from operating activities were $1.75 billion versus $2.34 billion in the year-ago comparable period.

Exelon's capital expenditure was $2,501 million in the first half of 2014 compared with $2,518 million a year ago.

Looking Ahead

Exelon expects to deliver operating earnings in the range of 60 cents to 70 cents in the third quarter, while 2014 earnings are expected in the range of $2.25 to $2.55 per share.


Exelon's hedging program involves hedging of commodity risks for expected generation, typically on a ratable basis, over a three-year period. The proportion of expected generation hedged as of Jun 30, 2014, is 92%–95% for 2014, 75%– 78% for 2015, and 46%–49% for 2016.

Other Company Releases

American Electric Power Co., Inc.’s (AEP) earnings per share of 80 cents in the second quarter 2014 surpassed the Zacks Consensus Estimate of 75 cents by 6.7%.

Entergy Corp (ETR) reported second-quarter earnings of $1.11 per share, lagging the Zacks Consensus Estimate of $1.14 by 2.6%

Our View

Exelon Energy managed to surpass the Zacks Consensus Estimate for earnings primarily due to increased distribution revenues at BGE and higher distribution earnings at ComEd.

We believe that the successful closure of the impending Pepco Holdings, Inc. (POM) acquisition will expand Exelon’s footprint in the Mid-Atlantic region. In addition, the regulated nature of their operations will give greater visibility of earnings going forward.

Exelon Corporation holds a Zacks Rank #3 (Hold).

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