Will Exelon (EXC) Thrive on Diversifying its Generation Mix? - Analyst Blog
On May 21, 2015, we issued an updated research report on Exelon Corporation EXC. The company’s systematic investments in diversifying its power generation portfolio and strategic acquisitions will likely boost its future performance. However, strict environmental regulations and commodity price volatility are causes of concern.
Chicago, IL-based Exelon’s first-quarter 2015 earnings surpassed the Zacks Consensus Estimate and increased year over year due to lower storm cost and favorable weather at its utility PECO Energy’s service territories. Higher distribution revenue pursuant to increased rates effective from Dec 2014 at Baltimore Gas and Electric also increased earnings.
Exelon invests substantially in infrastructure projects besides expanding its renewable and fossil fuel generating capacity. It plans to spend $16 billion in the next five years. Most of Exelon’s investment in 2015 will go to the Generation business, mainly for its nuclear fuel and energy generation systems and other internal projects.
Exelon also follows an inorganic strategy which involves buying assets in the same line of business. In 2014, the company acquired Integrys Energy Services Inc. from Integrys Energy Group, Inc. TEG. Exelon is currently on track to merge with Pepco Holdings Inc. POM. This transaction is expected to be concluded in the second half of 2015, subject to regulatory approvals. The proposed merger will help to expand its presence in the Mid-Atlantic region.
On the flip side, Exelon’s generation and energy delivery businesses are regulated. Any modification in environmental mandates may disrupt the company’s operations and force it to install new infrastructure at its utility systems, which will subsequently impact its financial results.
Zacks Rank
Exelon Corporation currently has a Zacks Rank #3 (Hold). PG&E Corporation PCG is a better-ranked stock in the same industry, carrying a Zacks Rank #2 (Buy).
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