Exelon (EXC) to Gain From Cost Management & $26B Investment
Exelon Corporation EXC has a presence in every stage of the energy business and is poised to benefit from organic investment, cost-management initiatives, debt reduction, as well as the hedging program.
We recently updated a research report on this Zacks Rank #3 (Hold) company, which has to adhere to stringent regulations and deal with the possibility of a rise in uranium prices, which can increase the cost of operations.
Tailwinds
Exelon invests substantially in infrastructure projects, in addition to expanding renewable and fossil fuel generating capacity. After investing $22 billion in the last four years, the company plans to invest nearly $26 billion over the 2020-2023 time frame in regulated operations, which will further improve resilience of its operations.
Exelon is targeting to lower operating and maintenance expenses by 1% over the 2019-2022-time frame. Given unprecedented economic crisis caused by the COVID-19 pandemic and the unpredictable nature of recovery from this difficult period, the company has identified $250 million of additional cost savings for 2020 and decided to lower capital expenditure of Exelon Generation by $125 million to preserve liquidity amid this difficult period.
Exelon continues with the hedging program to manage market risks and protect the value of its generation. The company’s hedging program involves safeguarding of commodity risks for expected generation, typically on a ratable basis, over a three-year period.
Headwinds
Exelon’s generation and energy delivery businesses are highly regulated, and could be subject to regulatory and legislative actions that adversely affect operations or financial results. If the government’s decision relating to uranium usage is against the company, there is a possibility that increase in the cost of uranium used in nuclear plants can result in an abrupt rise in operating expenses.
Price Movement
Shares of Exelon have lost 1.6% in the past three months against the industry’s 3.3% growth.
Stocks to Consider
Some better-ranked utilities in the same sector include Portland General Electric Company POR, Korea Electric Power Corporation KEP and Alliant Energy Corporation. LNT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Portland General Electric Company delivered an earnings surprise of 7.7%, on average, in the last four quarters. The company has a long-term earnings growth rate of 5.1%.
Korea Electric Power has a long-term earnings growth rate of 5%. The Zacks Consensus Estimate for 2020 earnings has been unchanged in the past 60 days.
Alliant Energy has a long-term earnings growth rate of 5.5%. The company delivered an earnings surprise of 30.9%, on average, in the last four quarters.
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