Shares of Exelon Corporation EXC have outperformed the Zacks Electric Power industry in the last 12 months. While the company’s shares rallied 27.4%, the industry gained 14.4%.
Exelon invests substantially in infrastructure projects besides expanding its renewable and fossil fuel generating capacity. Exelon plans to invest nearly $20 billion over the 2017-2020 time period, in a bid to improve reliability of operations. Such systematic investments in regulated assets will drive earnings growth in the range of 6-8% and rate base growth of 6.5% during this time frame.
Exelon expects to generate free cash flow of nearly $6.8 billion in the 2017-2020 period and intends to utilize the same to increase shareholders’ value. The company will use nearly $2.8-$3.2 billion to strengthen balance sheet and the rest to fortify existing operations. The move will help the company to serve increasing customer base more efficiently.
Exelon’s Generation segment is working on its cost-reduction initiatives and expects to generate cost savings of $250 million annually by 2020 from 2017 levels. This initiative will likely have a positive impact on margins from 2018.
However, Exelon’s financial performance is guided by price fluctuations in the wholesale power markets. Wholesale power prices are dependent on supply and demand, which in turn are determined by factors such as fuel prices, especially those of coal and natural gas. In addition, unfavorable weather during the third quarter adversely impacted demand and performance of the company.
The company’s Zacks Consensus Estimate for 2018 earnings per share inched up 0.7% over the last 60 days. The company delivered positive surprises in two of the last four quarters with an average beat of 1.76%.
Zacks Rank & Key Picks
Exelon currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry worth considering are PNM Resources, Inc. PNM, IDACORP Inc. IDA and UNITIL Corporation UTL. All three stocks carry a Zacks Rank #2(Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PNM Resources reported third-quarter 2017 earnings from continuing operations of 93 cents per share, beating the Zacks Consensus Estimate of 85 cents by 9.4%. Its 2017 estimates increased to $1.86 from $1.85 per share in the last 30 days.
IDACORP reported third-quarter 2017 earnings from continuing operations of $1.80 per share, beating the Zacks Consensus Estimate of $1.66 cents by 8.4%. Its 2017 estimates increased to $4.08 from $4.00 per share in the last 30 days.
UNITIL posted third-quarter 2017 earnings from continuing operations of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents by 45.5%. Its 2017 estimates increased to $2.03 from $1.98 per share in the last 30 days.
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Exelon Corporation (EXC) : Free Stock Analysis Report
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